XMesh depends on a pre-render and post-render script to use the high-res geometry. Normally this these scripts are added automatically when you create and XMesh Loader, but I wonder if they might be missing for you.
To set the pre-render and post-render scripts:
Switch to the Rendering menu bar.
Choose the Rendering -> Render Settings… menu item.
In the Render Settings dialog, switch to the Common tab, open the Render Options group.
Under Render Options, please ensure that the following properties are set:
Pre render MEL: if(exists xmeshPreRender){xmeshPreRender;}
Post render MEL: if(exists xmeshPostRender){xmeshPostRender;}