That seems right. Virtually all of the row numbers specified to or from XTREE, such as xtr'xrow and xtr'targetrow, are physical row numbers. (As an aside, I have an outstanding request to somehow return the display row # associated with a physical row #, which would be useful in cases where you want to report some kind of information related to the XTREE in a Message Box, where the display row # would be a lot more meaningful to the user than the physical row #, but I'm not sure that would help you here.)
If you are on, say, physical row 10, and then you right click on row 15 causing an exit, xtr'xrow would be set to 10 and xtr'targetrow to 15. So if you you want to return to the original row, you should set xtr'targetrow to xtr'xrow.