Well, I'll give you the two cent explanation and let someone who has a greater technical knowledge give you the $2 version.
There's a grain of truth in what he's telling you in that shorter barrel = less velocity, but tell you the truth most of the conventional semiautomatic "service" cartridges don't really get that much of a performance boost from the extra inch or two of barrel. While it's something you could definitely measure on a chronometer, the performance on a bad guy from the XD subcompact vs. the XD service in the same caliber isn't really going to be all that different.
The real advantage of the full sized XD or any other similar size gun over the compact is that it facilitates better shot placement with its longer sight radius and larger grip, not to mention a few more rounds on board in the Free States doesn't hurt anything either. Most people find out pretty quick that when they actually "run a gun" (self included in a big way) they can present and perform better with a full sized gun. That's why the bigger gun will perform better, it's about the shot placement and getting shots on target faster, not a minimal boost in ballistics. The compact is a compromise.
Of course if you really practice a lot with both, you can narrow that gap to where you can perform well enough with either.
Now as for the hollow point expanding, heck it might or might not out of the 4" gun (although it more than likely will). It has more to do with the design of the bullet and its relative level of technology than anything + dumb luck, imho. I mean what are you going to do, carry FMJ instead like that's some kind of superior alternative?
