A few things:
1. It would cost more. You'd need higher powered lights over your fuge to grow the stuff, so you'd need more bulbs and more electricity.
2. I think the first pictures are a little...misleading...although I don't think that's quite the right word. We all know our tanks go through natural cycled, algae being one of them...
3. I'm not sure if i buy that it really 'outcompeted' the chaeto for nutrients. That chaeto looked pretty sad in those pictures anyhow. The xenia will encrust over anything though, so if the chaeto was down on the rocks, or in a place where the xenia could grow over it, it might...but I'd have to see more than one instance of the battle to believe that the outcome was only based on xenia vs. macro.
3. Grins, I still don't think you've blue xenia. That stuff doesn't open and pulse the way that other xenia does...just kind of looks gnarled up for the most part. Red Sea Pulsing Xenia is often mistaken for the blue. I could be wrong, but your xenia looks exactly like my xenia, from the pictures I remember you posting a while back.
4. All that being said, that's a VERY cool fuge.