Perhaps it would also be wise to actually look at existing Xyz cards, but I'll teach you the basics about them.

Xyz cards (Not XYZ, cuz that's XYZ Dragon Cannon) use monsters of the same level, which overlay to form an Xyz monster with the same Rank as monsters used to Xyz summon it. The Xyz units [i]do not[/i] restore themselves; once they're gone, they're gone, and you can't replace them without card effects that specify doing so.