So what's the good way to generate XS (automatically) for access to a large source distribution?

I don't know - it's not something I've done, and Example 4 would indicate that a large amount of hand-editing of the XS file that's generated by h2xs would be required.
However, you might find something useful in perldoc Inline::C::Cookbook.
For example there's a small section headed "Replacing h2xs" that seems to discuss this very issue, though it's thin on detail and I don't understand it.

FAIRK, maybe that fiddly "Example 4" is, in fact, as good a way as any ?

Cheers,
Rob