If you had multiple domains that you wanted to connect the servers would also default to xmpp.other.domain.
If you wanted to connect to test.my.domain to test2.my.domain you were SOL. In a lab environment you could hack it with local DNS fuckery, but to actually deploy it would have been a nightmare. The whole thing assumed the entire domain would be served by one single server and all clients would always have good connectivity.
Their old IRC model was just to have a local server at each site with a cache. When the network went down (which it did frequently), the local users would still have connectivity, and when the link came back up they would get the backscroll. Replicating this sort of config with XMPP turned out to be very difficult, and eventually the bosses relented and let them keep IRC, or at least they passed the problem off to someone else after I left.
