There is nothing wrong with what you are doing, the problem is that for Ubuntu 11.10 the necessary library to open .xps files was not included and at the moment there is no package for it.
This has apparently and possibly will be included by default in Ubuntu 12.04.
You can add support to convert .xps files in to another format tough. On the packager's PPA you can read
Note: The evince version in ubuntu 11.10 oneiric ocelot doesn't work with xps (segmentation fault when opening the file) and there are several packages to be backported. I've decided not to backport it. It works in ubuntu 12.04 precise pangolin.
If you need to read an xps file, package libgxps-utils provides enough conversion tools, e.g. command: xpstopdf myfile.xps.
That means that you can add the PPA to your system and at least convert your .xps to another format that can be opened in your system.
To do that add the PPA to your system
sudo add-apt-repository ppa:medigeek/evince-xps
Update and install the necessary tools to convert your files
sudo apt-get update && sudo apt-get install libgxps-utils
You will then be able to convert your .xps files in to another format as described in the PPA description
xpstopdf foo_file.xps
will convert a file called foo_file.xps in to a .pdf file.
For more information on PPAs and how to use them please have a look at any of these 2 posts
