That should be changed to

   (cl-ecase xref-file-name-display
     (abs group)
     (nondirectory
-     (if (string-match-p "\\`~?/" group)
+     (if (string-match-p "\\`\\(~\\|[A-Za-z]:\\)?/" group)
          (file-name-nondirectory group)
        group))
     (project-relative

or something similar.