I guess I just don't understand what need is being fulfilled by the XM25.

It would be neat to be able to hit a guy hiding behind a berm with an airburst. I can think of zero occasions when I needed to do this. Anyone else? Even if there were a handful of cases, is this narrow range of uses worth the extra weight, bulk, new lines of ammo and parts, and the re-training that would be necessary?

There were a few occasions when there was someone in a building who needed to be killed before the building could be assaulted. That's why we train to put 40mm through windows. It's surprisingly easy.