XMP Files from MAC Not Reading On PC

Question

My question is two-fold, so I apologize that this is long, but it will be best with the backstory:
I shoot Raw on a Canon 5DMIII and import my images into Lr5 on my PC as CR2 files. I am beginning to work with an editor for the post production of my images and upload my files to her via Dropbox. In effort to keep the files as small as possible (and upload/download times shorter), I export my images as DNGs. Specifically, I ensure the 'Use Lossy Compression' option is checked and the 'Embed Original Raw File' is unchecked. I then resize the image to 2000 pixels on the Long Edge and the overall file is under 1MB.
She then imports the DNG files into her iMac for editing also in Lr5. Prior to my exporting, I will edit a few images as sneak peeks for my clients, flag them as a 'pick' and code them as 'red'. When she imports my DNGs, she can see the 'red', but she cannot see the flagged images. Fine, this is something I can live without. She does her editing, also flagging them as a pick and coding them red. She then exports as the original file.
She then uses ExifTool, opens the terminal application and write in: "exiftool -xmp -b -w xmp -r", drags in the DNG files and exports the XMPs. She then sends the XMP files back to me, I place them into my folder with my original RAW files, tell my PC to 'replace' the XMP files that are already in the folder. Then in Lr5, I highlight all my files and select 'Read Metadata From File'.
Now, initially, nothing happens. I am unable to see any images flagged or coded red. However, I do see the 'attention' icon (I'm sure that is not the right name for it) on the upper right corner of the images she has edited when in the library module. If I click on it, it tells me that the MetaData has conflicting information and do I want the file or catalog to be primary. I click on the 'file' option and only then do I see her edits, including the 'red' coding (but not flagged as 'pick').
Part 1 Questions: Why when I am instructing it to 'Read the MetaData From File' is it not automatically picking up her edits? Am I doing something incorrectly when I put the XMPs back in the original folder with the RAW images and have the XMPs replace the originals? Is it normal for the 'pick' flags to not transfer?
Part 2 Questions: When she edits my images, she creates a virtual copy and creates one color and one b+w of each image for my clients. As such, she sends me back two XMP files for one image. How do I get these 2nd XMPs to map to the virtual copy within my library, as I am only creating the virtual copy of an image once I know it is one she selected for the final gallery. If I create a virtual copy of an image she edited after-the-fact, the b+w XMP cannot locate it.
Any guidance is appreciated! Thank you!

Answer 1

I never tried this, but I'm pretty sure that with DNG files, Lightroom will ignore xmp files, even when you instruct Lightroom to "Read Metadata from File". Lightroom expects all the metadata to be in the DNG file, not in the xmp file.
Pick flags, as far as I know, are never written to xmp file; nor are they written to DNG files.
If you're going to make this transfer procedure work, you need to do it by either (a) embedding the metadata in the DNG file and send those back and forth; or (b) use RAW and xmp and then sending the xmp files back and forth (plus I guess you have to transfer the original RAW once to your editor)