This had me stumped for quite awhile. I finally resolved the issue, so I thought I would share with the rest of you.
I wanted to xref objects into me scene. I wanted them to update (modifiers, materials, etc) when the original was edited. Prior to creating an xref, make sure the merge transforms, merge materials, and merge manipulators are all turned off. And that the modifiers drop down list is set to xref. Also be sure to check the automatic update and enable.
You should now have a file that will automatically update when an xref is updated. I hope this helps, and spares you the time I spend searching for this information. Good luck modeling.