That will let you connect the TB to transfer files, etc, if that's what you're looking for. Can also use it to connect a USB Keyboard/Mouse to the Xoom if you are so inclined.
Before u even turn on ur device BT, have u checked airplane mode first, give it a few seconds, then check Bluetooth, then on ur device u check BT again?
Btw what honeycomb version are u running? If its the new 3.2 u need to shut down ur Xoom each time. Not sure why but I have to do it with mine