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Selfhosted
A place to share alternatives to popular online services that can be self-hosted without giving up privacy or locking you into a service you don't control.
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Let's not overcomplicate things. OP expressly wants a device that will play media off a USB drive. That's basically Kodi on a mini PC or single board computer, as many others have suggested — or like you say, plug the USB directly in your TV. No need for "hosting" anything or other server lingo.
And "a Kodi instance"? It's just an installation on a local device, it's not like it's going to federate or anything... Sorry if this is nitpicking, your second paragraph phrasing just feels like an unnecessarily advanced answer to a simple question.