CFL has assets and more importantly possesses a paying tv contract. XFL has only a name and potentially having teams in Canada provides zero benefit in attracting an American company willing to pay for their media rights.
Other than kicking, the XFL rules are not that different from any other failed alternative football league. I believe the attraction to their core audience is more political (pro or anti whatever) than what happens on the field.
What I am curious about is the escalators that are supposedly in TSN's contract with the CFL. Are there clauses in the contract that would pay enough to make adding more teams worthwhile? If not, then at minimum the XFL would need an American contract worth around $100 million.
Should the XFL and CFL merge, I could see them operate with different rules for a season or two before settling on a single set. Too drastic a change would lose too much of the Canadian audience. If this is not a concern, then why would the XFL even bother with the CFL?
Alternatively, they could try the AL/NL method of playing under unified rules except for 1. Depending on who is playing at home, they could alter the number of downs.