PA Floor Guy, happy birthday and congratulations with the new toy!
Domino 500 and XL overlap significantly in their capabilities. Domino 500 is smaller, lighter, and can cut 5,6,8, and 10 mm mortises. Domino 700 (XL) can cut 8, 10, 12, and 14 mm. The rule of thumb is that cutter diameter should be about a third of the thickness of the boards which you are joining. With this math in head, you can join boards with thickness starting from 15 to 30+ mm with Domino 500, and from 24 mm and upwards with Domino XL. Now, 24 mm is about an inch. Are you sure you would always be using wood / plywood with thickness of 1" and more in your projects? You cannot go to lower thicknesses with XL without sacrificing the strength of your joints, but you can easily go to almost 1/2" with Domino 500, while it still can easily and properly join 1 1/4" material. I think your wife was right - Domino 500 is a more versatile choice for both your hobby and work, while Domino XL is a specialized tool for "heavy lifting" in joinery.
In my opinion, Domino XL is better suited to making doors, barn-style massive furniture, etc. Domino 500 is a great choice for flooring and making smaller furniture - which I think is what you are doing.