I played with propagation a lot in the past, but I don't think local propagation (that resolves conditions of a bounded number of variables at a time, until everything stabilizes) can ever work, because it would contradict Razborov result on monotone circuits. I don't remember the exact argument, but I think it would imply a polynomial monotone circuit capable of resolving the instance. Also, XORSAT is not really amenable to this either, to solve arbitrary XORSAT instance you have to add together arbitrary number of linear equations, so the number of variables per equation can balloon up.
That's why more recently I focused on understanding what exactly is the role of XORSAT, and by serendipity, I stumbled upon the above-mentioned reduction (which I think is a really exciting result). XORSAT is great for testing different algorithms, because despite the fact we have a nice polynomial algorithm (Gaussian elimination), one can easily create arbitrary (and loopy) instances where propagation is difficult.
The way I see it, to avoid the problems with the bound, you need to preprocess the linear equations "inherent" in the instance by adding extra variables. The exact way to add variables depends on the instance, but it can be done by solving the linear equations. Propagation algorithms that go into the process blindly, without understanding the underlying linear structure, will mysteriously fail.
However, my current approach through logic, basically building up theorems about the instance, until it is decided, can be considered a generalization of the propagation approaches. The messages are true statements about variables, which are propagated by deduction rules of the logic. But this is done only after we have discerned the linear structure in the problem, which is addressed globally, as described above.