Matt,
Can you attach a screen shot of the TREE view from the XREF manger/dialog?
WRT the border being attached, it depends on where's it's attached. Remember that inserting an xref, ONLY brings in the ModelSpace of the drawing being attached. So, if the border is attached in a PaperSpace (a Layout) it won't matter, however, if it's in ModelSpace, it would cause older versions of AutoCAD to fail with a circular reference error - but I believe that's been fixed for a number of releases now.
Also, is there any difference between the xref demandload settings between your machine and the bad one?
Another thought, is there any 'custom mojo' being loaded that is different between yours and the bad apple?