The preference is based on availability of players. If there is space on an Xbox Server or enough Xbox players in queue at the time to spin up a new Xbox Server then you will end up in an Xbox Server with the Preference on. Otherwise it will place you in a Mixed Server if the above don't apply.
This means, if it does fail to get you on an Xbox Server with the Preference set, the alternative would be just not playing the game because there is nowhere available to put you. Rare decided this was bad form, and that if you're trying to play you should be able to play, so they set it to fallback to Mixed Servers if there is no spot available for you right now on an Xbox Server.
I suppose if that is such a problem they could change it, and people in that pool can potentially experience Arena levels of wait time to actually play sometimes. If that sounds better to you then keep on pushing for it and maybe it will happen.
Me, I'm gonna keep playing on Mixed only from my Series X and having no problems at all since this game is actually well balanced between KB&M / Controller (as someone who has played it with both). Lack of location based damage really mitigates the advantage one side has over the other, even if I can only manage to hit the edge of your hitbox while you hit a headshot every time we are both getting the same damage output.