Windows digital licenses: retail or OEM?

x509 said:

IF I understand all the answers in this thread, then I can take a Windows install, ad apply the generic key for a retail license. Then I can link that install with an OEM-licenced system. And as if by Microsoft magic that install becomes a retail install. Is this understanding correct?

Sort of. If you have a system that is activated via the OEM channel, and you change the product key to the matching generic Retail product key, the system will then activate via the Retail channel and MS will allow you to transfer the digital license via your MS account using the activation troubleshooter. What this also does is that Microsoft will even allow you to use the original OEM product key to activate a different computer. If you try it before you change the product key to the generic, Windows will come back with an error that the product key is in use on another computer.

x509 said:

Now I'd like to ask a sort of related question. If I have a system with a Home License, can I apply a Professional generic key, and end up with a Pro licensed-system?

Only if there is a pre-existing digital license for Windows 10/11 Pro stored on MS activation servers for that computer.

x509 said:

So in the end, does Microsoft really care that much, beyond the fact that I had to spend some money to acquire Windows, either by buying software or buying a system?

You don't buy the software. You buy a license for the software in the form of a product key. On an OEM system purchased with Windows 10/11 installed at the factory, the product key that you purchased with that system is stored permanently in the computer's UEFI firmware.