Even with the sway bar hooked up, you can still easily fully droop the suspension.
The problem lies somewhere within Nissans design. I have checked several Xterras now, and at full droop, the passenger side CV joint binds at 60 degree intervals, which means the outside joint is binding. The drivers side is fine.
I'm now running a slightly taller bumpstop on the passenger side.
The solution is a better (lower) diff drop kit.