This would solve a major issue with SteamOS. The SteamOS itself is immutable/read only as you know. This means, one cannot install or make changes to the core system (it is possible, but that is temporarily until update will revert those changes back). That is why we have the Flatpak support. But many software are not available there (especially CLI tools, if you use them).
This is where the Nix package system comes into play. In short, it allows for installation of programs without touching the immutable part of SteamOS in a controlled and safely manner. These would persist even on SteamOS system updates. For a better explanation, have a look here: https://nixos.org/guides/how-nix-works.html
Valve confirmed: https://github.com/NixOS/nix/issues/7173#issuecomment-1603858003 that Nix package support will be integrated into SteamOS! That’s huge. In example I have tools which I cannot distribute easily for Steam Deck users, because Flatpak does not support CLI apps. Nix would solve this issue!
What is the current state on SteamOS as a desktop replacement? My understanding is that the currently downloadable version is only the SteamDeck version and not suitable as a Windows replacement for the desktop.
I don’t use it as a desktop replacement (I still have a windows desktop). But I do but default have my deck docked and hooked up to a TV, in desktop mode.
I’ve installed various flatpack programs, to include discord, chrome, and a couple jetbrains ides for various languages. They work great. I’ve done a couple non steam games (diablo), with mild annoyance but success in the end.
I have not used any office programs on it (as much as it’s cool to like Linux, I just think Microsoft wins by a lot there, and have no desire to get them working on Linux).
The deck itself has some power limitations, but I have no reason to think that they would translate to steam os on a more powerful machine.
So basically, it probably depends on what you want. It’s pretty reasonable. Definitely good enough for my secondary computer that blocks ads for videos on my tv. But personally, I still want a windows computer, because windows is the default assumption for most software I use.
I don’t know what you mean by “steamdeck version”, but afaik the SteamOS you can download from steam is version 2 which is really old by now while the Steamdeck runs version 3 and is still not available for download outside of it. Mind you it isn’t just a major version change but they even changed the linux OS it’s based on, moving from Debian to Arch.
As for the replacement for desktop, the Steamdeck (and with it SteamOS 3) launched with full desktop mode available and while the core system is immutable as discussed, it’s still a fully functional desktop OS and as such it depends on your personal needs how much of a windows replacement it can be, just like any other linux OS. Also you might need a dock or other USB hub to attach a keyboard and mouse if you need them, but there is onscreen keyboard and touchpad on the steamdeck available.
SteamOS comes loaded with KDE for the desktop, which is arguably a better desktop experience than Windows. Very powerful file manager, built-in tiling, highly configurable desktop, and downloadable window manager scripts and add-ons.
The downside is the usual for a Linux desktop - software compatibility.
There seem to be some misconceptions and expectations from you. SteamOS is the Steam Deck operating system and will always be. So once it is available to the public, then it will always be the Steam Deck OS. That is what SteamOS is. It is build on the Steam user interface divided up into desktop mode and gaming mode.
At the current moment, there is no Steam Deck OS available to the public. The downloads from Valve to install on other machines is an old version called Steam OS 2, which is a completely different operating system not related to Steam Deck and abandoned for years in favor of the new Steam OS 3. Which is still not available. The stories and experimentation from other people you read are a community build operating system based on the recovery image of the Steam Deck, which only works on a handful of PC configurations that matches the Steam Decks hardware compatibility (in example no Nvidia).
So for short: Steam OS 3 is not available to the public yet, only an unofficial community created OS called Holo OS that is build from the Steam Decks recovery image.
And in general, Steam OS 3 works only limited as a general purpose operating system to replace a desktop. If that is your main goal, then I recommend to install a standard Linux system instead. But if your main goal is to play on the device with Steam, then Steam OS is perfect (once it is out). Also have in mind, a Linux based operating system will never replace Windows entirely, because many important programs you might use won’t work there. For some other programs you need to find alternatives and for some the alternatives might not be satisfying to you. It entirely depends on what you want to do with it.