I wasn’t able to find any comprehensive reasons as to why this may be happening, to confirm your suspicions I’d say that something on the Xiao has let out the magic smoke.
To further Trent’s response about headers something with a low profile would also benifit, check out these listings:
With the PGA you might be able to pop the headers in and only connect the USB breakout when you have to program the module, then detach it once programmed!
Regardless of how you connect everything I’d try to insulate parts that shouldn’t short, electrical/Kapton tape
PS: Here’s a forum post @Liam120347, a community member made a little while back where he hacked up a Pico to make it a smidge smaller (at around 35mm I’m not certain that it would fit inside the cube but might be worth a shot!)
