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In a nut shell, the Scalet Witch transformed Xorn into a Magneto doppleganger uncounsciously.

I thought there was an entry from the Handbook that was going to be posted here. No?

Morrison knew Magneto was going to be brought back after Planet X, he just didn't know how. He DID leave future creative teams a "back door," via the fact that Magneto's unstable, tyrannical personality was a result of Sublime.

Austen, Claremont's redressings, however, didn't even mention Sublime and thus we were given the cocktarded Xorneto-Explanation. Actually, I don't blame Claremont for this, or either Austen. The editorial team completely failed to pick up on the back door Morrisson had left them; I don't think they even got the meaning of the story. And just in case there were any remaining Xorn fans to exploit, the editor ordered Austen to incorporate "Xorn II" into his title.

http://www.newgrounds.com/portal/view/218160

So let's get this straight once and for all. (Kuan-Yin) Xorn was always real and had a twin brother (Shen Xorn). Esme (Stepford Cuckoo Telapath) introduced (Kuan-Yin) Xorn to Kick and thus became a Host to the Bacteria, John Sublime. Wolverine reveals to Jean in the alternate future 'Here Comes Tomorrow' that "Magneto killed you on orders he never understood". Xorn started to change personality and motives because of Sublime. Please remember that the events of Xorn becoming Magneto where just before Avengers Disassembled crossover. The Scarlet Witch (in her madness) changed Xorn to Magneto without ever even knowing she did so. So, under the influence of Sublime and the Reality-Warping powers of the Scarlet Witch; Xorn became Magneto, almost destroys all of New York, and kills Jean Grey (who is currently possessed by the Phoenix Force at the time). Xorn-Magneto says that Xorn was a character he made up (which was either a lie or he did not know better), even though he still hears Xorn in his head. After these events Magneto is found alive and Shen Xorn (the twin brother of Kuan-Yin Xorn) is discovered. The Avengers Dissasembled Event occurs revealing the Scarlet Witch to be insane and her Reality-Warping powers are going crazy. Just then, the real Magneto shows up in the clothes that Xorn-Magneto was wearing and retrieves his daughter. In the 'What If Event Horizons' trade paperback it is revealed that when the real Magneto appeared, the Scarlet Witch's reality-warping powers were affecting him as well (Made his outfit like the Magneto Imposter, Xorn!!). The House of M event occurs and afterwards, in the wake of the Mutant Decimation, the Collective is created. The Collective is lead by the Kuan-Yin Xorn personality (but it is important to note that this the personality that was changed by Sublime!!). Even though Kuan-Yin Xorn died moths before Decimation occured, his energy existed well after his death and was absorbed by the newly created Collective. Kuan-Yin Xorn/The Collective then searches out Magneto to give back his powers.

Hmm, interesting read.
Explains a lot for me, the last X-men issue I read before I read House of M happened to be the one where Xorn/Magneto's head got cut off (or maybe one issue more). So now I know why he suddenly was alive.

Sublime in aerosol form took over Xorn and made him copy Magneto's appearance.