The thing that really helped me learn normal maps was not to even try to mess with XNormal. I had a much easier time learning to do it purely in 3DSMax, and I always found xNormal to just screw things up (Not that xNormal is screwy, but if you don't know what you're doing there's a high probability of messing something up).
Anyways... First off, you have your low and high polys, right? Make sure to reset xForms on both before baking, and reset the pivot (I don't know if you need to reset the pivot, but I like to). I forget, but I don't think you want to reset the xForm on the high while it stills has turbosmooth active. Delete that, reset, then reapply it. Next thing is to set up your cage with the projection modifier. You want the cage to be tight, but not touching anywhere. There are a few areas on your bake that the cage is missing completely by the looks of it.
I'm not quite sure what that "Automatic Flatten UV's" modifier is up there as I've never used it, so I know it's not needed for baking (Maybe one of the pro's on here can clarify what that is being used for? Or does it serve no purpose?)
Last thing, and I might be mistaken on this, is don't use mental ray for normal maps. Just use the default scanline renderer. I thought mental ray had issues with normal maps rendering, but even if it doesn't the scanline renderer works fine if I'm not mistaken.
Oh, just noticed what is probably causing the issue. In your render to texture settings, set objects and sub-objects to "Use existing channel." You're on use automatic unwrap, so it isn't even using your set uv's. Unless you've messed with the uv channels, which it looks like you might have somehow, your uv's should be on channel 1.
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Anyways... First off, you have your low and high polys, right? Make sure to reset xForms on both before baking, and reset the pivot (I don't know if you need to reset the pivot, but I like to). I forget, but I don't think you want to reset the xForm on the high while it stills has turbosmooth active. Delete that, reset, then reapply it. Next thing is to set up your cage with the projection modifier. You want the cage to be tight, but not touching anywhere. There are a few areas on your bake that the cage is missing completely by the looks of it.
I'm not quite sure what that "Automatic Flatten UV's" modifier is up there as I've never used it, so I know it's not needed for baking (Maybe one of the pro's on here can clarify what that is being used for? Or does it serve no purpose?)
Last thing, and I might be mistaken on this, is don't use mental ray for normal maps. Just use the default scanline renderer. I thought mental ray had issues with normal maps rendering, but even if it doesn't the scanline renderer works fine if I'm not mistaken.
Oh, just noticed what is probably causing the issue. In your render to texture settings, set objects and sub-objects to "Use existing channel." You're on use automatic unwrap, so it isn't even using your set uv's. Unless you've messed with the uv channels, which it looks like you might have somehow, your uv's should be on channel 1.