What is the {edition} movie naming tag supposed to do?

IIRC you’ll need to place the editions in separate folders to let them properly pick up the extras.

Beyond that… as of today Editions offer basically just what you’ve described:

  • they show up as separate items in your library, each of them tagged with the edition name
  • each edition item will show an Other Editions of… hub
  • you can filter for specific editions

There’s a feature suggestion discussing an option to combine the different editions into a single library item

Edit:
here’s the link to the suggestion thread I had mentioned above.