I had a colony of xenia that for about a week deflated and looked pretty sick. Eventually it regained its old form. I think many people have had a similar experience. Not sure what caused this behavior.
I believe its normal for Xenia to shrivle up when the lights are off, so I wouldn't worry about that. If it is showing this behavior during the daylight hours it may reacting to some form of stress.
Where in the tank is the colony located? MH lights could be too intense if the coral is placed high up in the tank.
Any surrounding algae that may be bothering the coral?
Any suspects in the tank that may be nipping? Crabs, fish or urchins? I once had a long
spine urchin completely consume an entire colony of Xenia in one sitting.
Like MN said, make sure the conditions are correct. Aside from light, water current should allow the polyps to gently sway to and fro. To much current may cause the coral to retract its polyps.
The pulsing action is not completely understood and often stops. Until more is understood about the pulsing phenomenon, we will not know whether or not we can control it.
And sometimes, for what seems to be no good reason, the coral fails.

Hopefully this isn't the case.
Good Luck