Iodine certainly couldn't be the cause of the Xenia crashing. I don't think its possible to overtreat Xenia with iodine. It literally soaks up iodine. I soak Xenia in a concentrated Lugol's solution whenever I frag (1 drop per gallon). I have found that it speeds up reattachment.
I think what you may have had was a cascade effect. One thing goes, such as the Leather, and it produces more toxins that produce even more toxins. I think that dead Xenia is terribly toxic. It does a great job of tying up otherwise toxic stuff, but when it crashes it releases it back to the water in fairly large amounts. This is an example of the toxic cascade I was referring to. The cascade results in a pretty potent soup of toxic compounds. I've seen this happen during my fairly extensive experience in killing stuff while moving tanks.
Gary
Gary
125 SPS, 75 gal. LPS/softie reef, 9 gal. Nano