Autodesk has finally fixed a major wall cleanup issue between mirrored xreferenced drawings in AutoCAD Architecture!
Cleanup between overlapping walls in different xreferenced drawings was introduced several releases ago in AutoCAD Architecture (Architectural Desktop name at that time). As they continued to improve the feature, walls still had problems cleaning up properly when the xref was mirrored. If an existing xref was copied and mirrored, the mirrored version would have gaps in similar locations as the first instance of the xref. If an xref was brought in and mirrored (without being a copy of another xref), then the xref would not cleanup at all. Either way, walls in mirrored xrefs would not cleanup correctly with walls in other xrefs.
In AutoCAD Architecture 2010, wall cleanups now clean up correctly when the xref is mirrored, regardless of whether the xref has been copied or not.
This feature is very important for those users working with apartments, hotels, or other situations where the same layout is used repeatedly in the building. In those situations, a room or apartment file is created and xreferenced into the host file multiple times or copied multiple times in the host file. There will almost always be a need for mirrored units in those situations. This is a huge and beneficial item for users with those needs.
If you are not familiar with setting up this feature, go into the drawing that will be xreferenced and open the Style Manager from the Manage tab. Expand the Architectural Objects category, then expand Wall Cleanup Group Definitions. Highlight the name of the cleanup group for which you want to enable this capability. In the right pane, place a checkmark next to “Allow Wall Cleanup between host and xref drawings”. Pick the OK button to exit out of the dialog boxes. This will need to be done in each drawing that contains walls that you want to xref into another drawing and have walls clean up. This can also be set up the template if you always desire walls to clean up between xrefs.
Applying Technology to Architecture 
This was a great explanation.
I would like any advice on how to use this the most efficiently.
I have a drawing “A” that is xreferenced into a drawing “B” and attached. I need the walls in drawing “A” to merge cleanly with the walls in drawing “B”. I then xreferenced drawing “B” into a third drawing “C”. I xclipped a portion of “B” and then copied this xclipped version so that there are now two versions of “B” in drawing “C”.
The walls are still trying to merge between the xrefs and the xclipped portion of “B” is creating ghost wall merges. Is there a way to turn off the merging between the two xreferences of “B” in my final drawing “C” without loosing the ability of “A” and “B” to merge walls cleanly?
What you are describing is what happens when xreferenced files are copied in a drawing. An alternative method to avoid the problem you describe is to xref “B” into “C” a 2nd time instead of copying “B”. Before you xref “B” into “C” the 2nd time, you will want to rename the first xreferenced instance of “B” (in the References palette). After you xreference “B” into “C” for the second time, you will need to xclip it again. While it seems redundant, it will alleviate your problem. You will also have separate layer control over each instance of “B” in your Layer Properties Palette of drawing “C”.
I had no idea you could do that and can think of many helpful uses for this process but it didn’t resolve the issue in my case of the ghosted Xref walls of the clipped Xref still trying to intersect with the walls of the original xref . I ended up making different wall clean up definitions for the walls I needed to connect and the walls I didn’t need to connect and thankfully the walls i needed to specifically connect don’t overlap when I xclip the xrefs.