PbtA Hearts of Wulin Xianxia
Glad to see interest for this!
I think the level of fantasy from The Untamed would be ideal. Grounded in realism most of the time, but epic fantastical moments are still possible from the very strong or by cooperation. Definitely not punching holes in mountains level, but cultivators may be able to fly on swords, control the elements, or cause shockwaves. Maybe like the height of the world is similar to higher levels of DnD, but not epic levels.
Just to give some context, this is some of my inspiration for the fantastic elements of xianxia:
I like the cultivation aspect of pursuing the Dao to ascend to heaven and attain immortality, but it still seems like an impossible dream. The top cultivator, Sword Saint, etc may seem so close to the goal, but they are not a god, and if they were, they'd have actually ascended to a higher realm, leaving the mundane realm of the setting. There's always rumors of it being possible though, and sometimes when elder cultivators disappear from view, it's unknown whether they ascended without telling anyone or simply passed away (most of the time, they passed away or went into hiding).