You'll need to make an Xbox Live account, as stated, but you don't have to make a PAID account. You only need to get the paid Gold Membership if you want to play online or get the freebie games. Basic stuff like using the store for buying digital games, messaging people on your friends list, etc. Should work just fine without Gold. Does for me, anyway.
If you have an existing Mircosoft account from another service, I think it can link into your Xbox account so you don't have to set up something brand-new if you don't want to... not 100% sure since my 360 was my first official Microsoft product, so mine's always been connected to my Xbox.
You DO have to download EVERY game, even if it's on a disc. Having said that, it's very easy to get an external drive set up connected to an Xbox (the S model at least has a USB port on the back for that reason), so it may be cheaper to buy a system with a smaller drive & an external. Unless you prefer an all-in-one unit, then plan accordingly.
As for whether or not you should get one... there's very little on Xbox these days that can't be played elsewhere. If you game on PC, there's pretty much no reason to bother with one. If you use consoles exclusively, you may find enough content to warrant the purchase, but really, REALLY look into it first- the handful of third party titles are starting to migrate to Switch, so unless you really like the first party lineup it may not be worth the money.
Watch for sales. The Xbox's underdog role means there's some incredibly good sales on consoles from time to time. Don't pay full price for one, you shouldn't have to.