Stata will know that you want to create indicator (dummy) variables for those variables prefixed with i., and it will do so for you automatically. In this case all you need to do is drop the -xi:- from the front of your -xtreg- command and you have it in factor-variable notation. So it is probably best if you more or less forget you ever heard of xi. It's an old command that is nowadays only needed in rare situations, most of which pertain to archaic commands that have been superseded by newer ones that carry out the same functions. The thing you are doing poorly is using xi. Set maxvar 32767Then reload your data set and start over.
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