qubes-console-dispvm lets you access the actual console of a Qubes VM (/dev/hvc0), as opposed to accessing a pseudoterminal in a graphical window. The main reason that’s useful is because it lets you access a VM even if the GUI agent is completely broken or you are trying to avoid the dangers of running a qubes root console via X11.
xterm needs to be installed in the VM connecting to the console, not the VM providing the console. So if someone’s default management DispVM is based on Fedora, the Fedora template will need to have xterm installed. If someone sets Kicksecure as their default management DispVM, and xterm isn’t installed, it will break the “Open console in qube” feature for all qubes, not just for Kicksecure qubes. (We also don’t want this feature broken for Kicksecure qubes because the GUI agent can break, just like graphical login can break.)
X11 is what we have on Qubes OS for the time being, so there’s no reason to avoid X11 there yet (though that day will hopefully come). We don’t want to break a Qubes feature for everyone, so we should keep it available.