Well I've got a good bunch of it thriving in my tank, and the water quality seems to be the same as always. My fish, clam, and other corals seem to be doing fine, so I would have to say that the Xenia certainly aren't fouling the water.
As for being "good" for the water, well they are supposed to do better in water that is not as "pure", so perhaps the Xenia thrives in poorer water because it does absorb those bad chemicals?