I dont think they were fully aware of how bad it would be on the non pro consoles and most sales were on PC atleast at release.
I agree with your post outside of this part. They were testing the game internally - they had to know how bad it was on last gen consoles. I didn't play it on a last gen console or even a current gen one. I played it on PC and it was still buggy, but it was something I could tolerate. But from what I saw from last gen consoles it was outrageously bad.
I wont say its impossible. But even if the Expansion sells well it might be a fools errand too keep people working on it, if the plan too implement more then just story missions that is(new systems for example like mutations/runewords in W3). If they just release story missions with already completed stuff they could probably keep going forever exept for the voice acting (been reading some stuff about that, wont say anything more in case its true).
Also depends on price of the expansion and how big it will be, theres info about it but its very shady and im not sure its true. If its a shorter expansion they cant really charge too much and must still make a profit, been working pretty hard on it with quite a lot of people according too the distribution charts. They could take a short time loss for a long time gain in reputation and goodwill i guess. But thats not really what most companys does today....
I also agree on a few points here too.
1. If the expansion is wildly successful then I could see them making another one. It is hard to believe it will be a smash hit though given the bad reputation the game has and how long it will take after release. But maybe the marketing hype train gets everyone going. But then on top of that it has to be legitimately good.
2. I also agree that new content and systems would (and should, for timings sake) just be axed from the release. If they are going to make another big expansion just make it story based content on top of the existing systems in the game so that you aren't spending a ton of time tweaking the engine and stuff. I think it would even make sense to just put it directly in Night City rather than building out a whole new area and stuff - as cool as that might be.
3. Some of it depends on the size of this expansion too. If we get a Blood and Wine size expansion I highly doubt we get anything else, regardless of how successful it is. I think they'll use that as a way to wash their hands of Cyberpunk 2077 and focus on Witcher 4/Cyberpunk 2 while keeping people occupied with whatever Molasses Flood is doing, the new GWENT thing coming out soon and Witcher 4 hype.