Invoking a commandline executable file needs always a special look for a method how to transfer one or more filenames into the process of the executable file.
In case of the "xrecode.exe" there seems to be no input option for a simple "line by line" "vertical" list file.
But there is the option "/sendto .. .. ..", which adds all specified files/folders as input parameters.
Anyway ... I think you can use that.
You have to write a Mp3tag MTE script, which is able to create such a "item by item" "horizontal" "space separated" list of filenames, with each parameter included in double quotes.
This should be feasable, using the commands, respectively functions, $loop, $put, $get and so on from the Mp3tag Export Scripting Language.
Note: the option "/sendto .. .. .." has a risk for automated processing, because of the length limitation of the DOS command line.
See also ...
Regarding the wanted xrecode processing, you can take into account to invoke xrecode.exe consecutively, for each given media file separately, one by one, from within the batch file, created by the Mp3tag export feature.
If you want to get an impression how to create a batch command file by using the Mp3tag Export feature, then have a look at this FPCALC example ...
There are other example scripts buried in the Forum, you gotta find them.