There have been many people who turned off their xp to do dungeons. I have had a number of twinks over the years that I locked at certain levels and queued for dungeons, often ending up in heroic dungeons with others who had locked for the same reason.
When queuing for PvP, xp off players are placed in a separate bracket from xp on players, one that in most brackets never pops.
Never before did it happen that xp on and xp off players were separated in PvE queues. If it is, this is a new thing.
Edit to add: I queued a 111 twink tank for a dungeon and the queue was instant.
I think we need to differentiate between LFD, ie, the random dungeon finder, and LFG, the group finder where people join groups that others have made or list their own group.
I have never seen the xp off debuff when solo queuing for a random dungeon. It will show up when a group containing a twink queues.
Also, if you accidentally queued for a bg, that would explain the message you got.