One of the secrets of installing new freeze plugs is getting the bore as clean as possible. Looking at my XJ I don't see enough room back there to do that. Actually you need a slide hammer to remove the old plug, that doesn't seem possible looking at mine. It sucks but emoving the head might be the best approach.
Whats a slide hammer?
I had the same problem with my 99 XJ about 7 years ago. I spent about $180 and two days taking the head off to fix it. Afterwords I "heard" that the local dealership has a special tool for that freeze plug and they charge $120 to repair it. I'm sure other dealer service departments would have the same tool. $60 cheaper to have someone else do it, sounds like a deal to me.