Thats a fact! Any coral capable of stinging such as Frog Spawn, Hammer, Grape, Torch, Elegance coral, Fox Coral, Bubble Coral, Tounge/Slipper corals or Hydnopora just to name a few will annilate anything they touch with thier sweepers. In fact some are so potent that I have actually used Elegance corals to rub them against Aiptasa to kill it and rid it from my tank.
Xenia doesnt sting and it doesnt secrete chemicals for protection. It maintains its survival instead by rapid growth. It should do well along side Zoanthids and Palys with few issues resulting.
If your Xenia is growing that well, you might want to consider pruning it back a bit and then with the cuttings attach them to rock rubble and take them to a frag trade or back to the LFS for some store credit or cash.
I have several corals like this that take cuttings from and I will give the cuttings to new reefers to help get them started. Later down the road when they get something cool I dont have they can return the favor by giving me a cutting. Even if they dont get something cool I dont have...should my tank crash they can re-supply me with the stock I had before helping me to quickly rebuild my tank. Its a good insurance policy for a reef tank!
