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The library I work for also has Axis 360. Baker & Taylor, the company that offers this service, has been saying for a long time that they will be adding an option for Adobe Digital Editions, which should add support Nooks, Kobos, Sony, and almost everything else besides regular black and white Kindles. I originally heard that this was supposed to happen in the first quarter of 2012, but it's been put off several times since then. It also isn't clear yet how much extra this option might cost for libraries.
The problem with file conversion isn't just the XPS format. They also use their own DRM.
On the whole I think it's a pretty good service, but I am disappointed that people who bought Nooks specifically to use them with library ebooks have been left out so far.
If you happen to have a Kindle Fire, there is a way to install Blio on it and it works pretty well.
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