Yes, coexistence means that some data is shared between Xe and World. In particular, most Business Data and a few Control Tables are shared. This is mapped out in the OCM, which spells out where to find files for the environment. It's the equivalent of a library list on the AS/400.
The upgrade process uses the OCM to figure out from where to pull the tables during Installation Planner and Workbench, so data from both World and Xe will be upgraded.
If you have custom tables in World (but not Xe), then you will have to write table conversions to handle those separately.
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