XPS is part of Xilinx's embedded toolkit (EDK). The purpose is to put a microprocessor into the FPGA, using the resources that exist in the FPGA. Because the FPGA can be configured, there are many possible microprocessor systems that could be designed.
There are two main ways to have custom expansions, either adding custom cores to the EDK project, or adding the EDK project to an ISE project and then instantiating the cpu.
The first is intended to connect peripherals to the CPU using the standard OPB/PLB/FSL/LMB/LL buses as appropriate. In this type of design, you may want to make an HDL file, then add a wrapper that converts the interface to one of these. This allows the logic to be re-used in non-EDK projects. peripherals can also be connected to other peripherals in the "ports" tab.
If the design has large portions of HDL that don't need to interact with the EDK project, you can make an ISE project, then instantiate the CPU. At this point, you might have a single interface from the non-EDK portion to the EDK portion.