Xiaoyu really isn't timid.
Do you know her status? She's a high-ranking noble from the Mountain and Sea Realm, part of the Fox Royal Family.
Foxes are inherently considered aristocrats among the Demon Race, and she's an aristocrat of aristocrats. Overall, she's very impressive. Though she's young and her abilities are fairly average, her bloodline and status speak for themselves.
It's just like in Japanese anime—bloodlines matter greatly within the Demon Race, and they're extreme proponents of the pedigree theory. Xiaoyu has dressed to impress for this banquet, and even though she wasn't formally invited, her royal rank—on par with Taiyi and Dijun—means no one besides those two has the authority to chastise her. As for everyone else? They're simply not qualified. So, she sits there without the slightest hint of awkwardness, wagging her tail and waiting for food.
