If you are not running the DSi XL's latest firmware, then the fix I described is irrelevant because your card isn't booting for other reasons.
I just thought you had updated your DSi XL firmware (which does block the DSTwo) because the error you described is the error that is displayed if you do that. I don't know that it's necessary to have the "_dstwoplug" directory have anything in it, but, the latest DSTwo OS (isn't really firmware) is version 1.08 not 1.07. The links on the official site are wonky (they didnt update the header, but right below it the recent version is described as 1.08), and some guides on these forums aren't updated to make note of that.
The download button does link to it, but I have also made use of a mirror site (
http://www.linfoxdomain.com/nintendo/ds/ ) in the past to confirm updates or get faster downloads (for off brand cards that have slow or nonexistent websites).
The file that I had to use to update my DSTwo came from a separate archive than the DSTwo EOS archive, it is called "Firmware 1.05" and is hosted on the Linfoxdomain site.. I just don't remember which guide in the GBAtemp's Supercard forum I found that directed me to this firmware update originally, and I did originally obtain it from the official site.
The update may be included in the DSTwo 1.08 files but I don't really know. I don't know if I was running 1.07 or 1.08 but I did confirm that I needed to run the update to use the DSTwo on my already updated DSi XL, it is a .dat file (ds2update.dat) that runs once and deletes itself upon completion of the update. If you put it where it's supposed to go, this happens automatically, even in an already updated DSi system, but I did it on my DS Lite to be safe and so I could watch the progress bar if there was one.
edit, to clarify:
Your DSi XL's most likely came with Firmware 1.4E installed.
If you are able to go into the DSi Shop at all, then it has been updated to 1.4.1E, which also blocks DSTwo.
There isn't a higher version for Europe or North America currently.
Your DSTwo usually doesn't come "flashed" unless you made sure of it during the purchase process.
The DSTwo EOS files alone will not make the cart work on DSi 1.4.1.
The "DSTwo Firmware Update" must be run in order to make it compatible. It will then be compatible with all DSi 1.4.1 systems even if you reformat your microSD and re-do your EOS files.