Hi job-bicycle,
Thanks for the files!
The content that is Referenced shows up as child objects, while the XRef is not a Generator, more a connector to remote items.
If you make this editable [pressing the c key], the referenced items become local objects, while the Reference Object turns into a Null. Now the confusion might come with the Cloner, made editable, it turns as well to a Null. However, it produces (generates) new content along with the settings that have been created before from its child objects. The Cloner is the number of cloned and newly generated objects; the Reference Object just provides existing data from somewhere else.
Let's assume the XRef has a collection of objects, and those need to work all with the Cloner as "Source", then you need to use a Connect object as parent, and turn the XRef into a child. The Connect Object now provides all to the Cloner. The Connect object has become what your question indicates, that the XRef should have provided.
Please let me know if there are any further questions about this.
Enjoy your Sunday