I've noticed a lot of people having difficulty getting the XL client to work. The most common request is "can I see your server.txt file" While the old timers here are well aware of this, this is just an FYI for some of the XL newbies that might be following this thread - you can't use someone elses server.txt file without modifying the IP to match your own configuration otherwise it won't work. When you set up Xlobby as a server you see this screen:
Note the IP address that is shown in the highlighted red box. This is the IP that needs to be placed in the 'SERVER' entry of the server.txt file.
server:192.168.1.103
screen:ppcmenu
resolution:auto
quality:90%
Make sure that the IP in YOUR xlobby server matches the IP you stick in you server file.