Yeah Xion's death and her whole story are just so sad, her death is by far the saddest cutscene in KH in my opinion, and her theme... ;-; I actually taught her theme on piano just because of how sad it all is...
I completely cried at the ending :< Xion was my favorite character, but I'm almost sure that she's returning in KH3 mainly because Sora unlocks the power to bring back people who were thought lost (died, vanished, transformed, etc) and in Riku's enidng in Dream Drop Distance, Ansem actually explains to him about this and he hints that "even an empty puppet" can be brought back which is Xion if you kno her whole story so I am hopefull
This Comment contains minor spoilers, but it still counts as spoilers. If you don't want anything spoiled, don't read it.
Xion does appear in DDD. When Sora Arrives in The World that Never Was, he sees Namine, who tries to run away. Sora then chases her and finally catches up to her. Before Sora can thank her for fixing his memories, she turns into Xion. Sora doesn't know who she is, but cries, because of Roxas. She than runs away and dissappeared. So there you have it.
If I spoiled anything, I gave you a warning, twice. Next time listen.