If an ACH debit fails but the funds were already credited to the destination bank, what should be done?

You have an IOU and they are now asking for it.

Regardless of what it costs, you will have to make payment. The very best you can negotiate is a check payment.

If you don't do it within a certain time-frame, they will hit your bank with an NSF request and this will come on your bank's report. From a legal standpoint (and I think you are talking about Xoom here), they have all the information to go after you (regardless of how small the transfer was).