don't know if you found this/or used it as a guide but it sounds like a similar problem I had while first playing with XLink (just 7 days old on it so def. not a pro). If you have done this, sorry, it worked for me after following the steps.
1. Goto www.teamxlink.co.uk and sign up for an Xtag and download Xlink Kai Evo Vll
2. After installing Xlink open the Kai Configuration Tool
Now that you are looking at the Configuration screen at the top you will see Select a profile, the template will be applied over your settings. At the drop box underneath it, select the profile Engine only (for dashboards).
3. Next put in your Default Username and Password. This is the Xtag u signed up for at the main xlink website before.
4. Ok now go to the left side of the configuration window and youll see two options here, one Being Launch UI, leave this one unchecked, then underneath it you will see Launch Engine, make sure this one is Checked.
5. Now go to Close UI After and select Never from the drop box.
6. Finally go to Accept UI connections From and select Any IP Address from the drop box.
7. Now you are done configuring Kai hit OK to save your setting and exit.
8. Connect to your xbox and get the xboxmediacenter.xml file from the XBMC folder, if your using Flash FXP right click and select edit from the list.
9. After opening the .xml file you will see a bunch of code, look for a section that looks like this (its close to the top of the .xml file):
<xlink>
<username>Put Your Xtag Username here</username>
<password>Put Your Password here</password>
</xlink>(THIS WAS MISSING IN MY XML FILE)
when your done putting your Xtag and password in, upload the .xml back to your xbox with the changes youve made to it.
10. Go back to your computer and start up the Xlink Engine from your start menu.
11. Next restart your xbox and load up XBMC.
12. Now with the default skin the Xlink icon is at the top left, and its the 4th icon from the left, select it and it will bring you to the main menu.
12a. Not that this is a step or anything, but I think that the Project Mayhem skin is nicer for using Xlink, and it has a really nice layout, im not sure but I think it comes with the new CVS build 6-6-04
if not get it from www.allxboxskins.com
13. Now if everything was done right your Xtag should be at the top and you should now be able to go into the arenas and see other users in there.
14. All you have to do now is load up a game and start playin

)