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I think I remember xhld putting a reddish hue around the feed at one point, but I believe that changed later on.
Whenever trying xhld and the xoopsheadline modules, I always made sure to at least uninstall the other one. However, I recall that at one point suring my testing of xoopsheadline there were still xhld files on the server. In the case that this was the problem, I am testing xoopsheadline without the xhld files now.
That demo site you provided a link to seems to display the feed fine; could you provide me with a username and password (via PM if you want privacy) so that I could examine the xhld setup?
~TCMTCM