Your comments

Hm, they do indeed seem very aggressive about it. In fact, there's only two options. One is to disable bluetooth controls altogether, the other is to *increase* bluetooth priority =P

I've posted a request on their forums at I'll get back to you if I hear anything.

Hm. No siree, that didn't fix it... Poweramp still starts playing as Xiialive stops. Still using the beta version, mind. I also tried to kill the Xiialive process and restart as well as killing the headset process from Poweramp, neither of which helped.
Ah yes, sorry for not mentioning my Android version, it's 4.02. Anyway, it does indeed work with the beta. However, when I do press the button Poweramp starts playing, instead of there being silence. Not sure if that's something a call to your app should block, or if there's a setting in Poweramp / Android. I'll poke around a bit tonight, but if you've any suggestions on how to solve the conflict I'd love to hear them.
Either way, thanks for clearing my primary issue up! =)