If it's the character that got de-aged (I wasn't sure if you were referring to the same person on your original post :P), I can picture close friends using Xiao almost as an awkward I-don't-know-how-to-handle-this-younger-version thing. Or as a way to placate or calm the child down if they suddenly find themselves in a situation where the child cries or throws a tantrum.

Or as an inside joke... where Xiao-name is used to refer to the de-aged version while Da-name is when they need to talk about the character before he got de-aged. :P

If the character was someone who was not very "Xiao" anything at all back in his normal state (serious, huge build, manly man, etc.), then using Xiao could potentially come with giggles among close friends.

Okay, sorry, I probably gave you waaaay more than you wanted to know. I'll shut up now. >_>