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I believe that they're relating the X in XCurl to eXtend.

I think it is. The capitalization is like that because the project name is xCurl, with x. Maybe they should have called it eCurl?

Microsoft's console gaming stuff is very "X"-centric (Xbox, XDK, FATX and so on).

DirectX, ActiveX, etc

i'm thinking two themes here: the X in xcurl and the famous MS-ism "embrace, extend, extinguish"

Yes.