How is that not an XMPP problem?

I meant that "users perceive it as something XMPP can't do", so it's not a protocol-level issue, as the feature exists, but a branding and compatibility issue. Those, depending on how you define XMPP, are part of XMPP's problem.

Because it works fine with the right client.

I'd really appreciate more detail, here.

If everyone is using Conversations as their client, group chats work fine. Issues arrise when you introduce other clients into the mix ...

So Conversations has implemented a feature that isn't in the protocol, but important enough that when the feature doesn't work, users are turned off?

Or it's part of the protocol, but design decisions lead to client interoperability problems?

Maybe there's a third answer, but both of these are problems with XMPP.

It's part of the protocol, but many clients don't implement it correctly.

Multi user chats/chatrooms are part of the protocol though.