AFAIK, the problem is that the `xspace` macro that (basically) checks if a letter or punctuation comes next, may be followed by tokens (from user or package code) that are not category 11 or category 12 tokens, rather expandable tokens that, after some expansion and possibly execution steps that `xspace` has no way to know (think non-expandable loops), may append items to the horizontal list, items which may ultimately appear as horizontal space, letters or punctuation. In short, `xspace` can't see through the future execution of TeX code that follows its main macro.