The Windows driver (serial.sys for example) and the NI-Serial driver should be obtaining the default port configuration from the port settings in the device manager. Thus if XON/XOFF is selected as the default state in the device manager, then XON/XOFF will be turned on whenever a port opens.
As far as flow control with the traditional serial vi, I do know that there are some problems with those vi's and flow control (as in, it doesn't work). There are quite a few shortcomings/bugs with these vi's, and thus National Instruments' recommendation that all serial communication use NI-VISA. The VISA communication vi's are much more powerful than the old traditional vi's and offer a much wider range of configuration and monitoring/status option
s. If you switch over to NI-VISA calls instead of the traditional calls you should get full control over the flow control settings. You'll also be able to use NI-Spy to debug your communication problems.
Speaking of communication problem, by "not working" do you mean no data is seen, data is corrupted, or something else? XON/XOFF simply is a method of telling the sender to start/stop transmitting when certain characters are sent. Perhaps the XON is never seen? Is it possible to use RTS/CTS handshaking instead?