We are aware that this part is tricky and will have little effects on normal operations, as best practices are to use xid_target or lsn_target.
I'm working with Nicolas and we made some further testing. If we use xid target with inclusive to false at the next xid after the insert, we end up with the same DELETE/DROP directory behaviour which is quite confusing. One have to choose the xid-1 value with inclusive behaviour to lake it work.
I assume this is the right first thing to document the behaviour. And give some examples on this.
Maybe we could add some documentation in the xlog explanation and a warning in the recovery_target_time and xid in guc doc ?
If there are better places in the docs let us know.