Hi Kathy,
I think that is exactly how I'd start - with Xiao Chai Hu Tang. It will enhance the efficacy of XFZYT and fits the other symptoms, as you noted
I'm glad the diet was switched back. There is no apparent medical benefit at all, as far as I can see, to going 'half raw, half kibble'.
Even if the lesion is grade II or III, your treatment may still induce remission. That is fairly commonly seen
To 'prove' that XCHT is helpful, have the dog come back in and massage the area immediately distal and cranial to the fibular head, near the cranial tibial tuberosity. If the pulse softens, then XCHT is your baby.
Please let us know how it goes!
Good luck,
Steve