So in the Untouchable package, it starts at 500 XP plus 100 for each level beyond the first. But if it can only be done at Character Creation, how would anyone go beyond the base package, unless you are starting at a higher level? Or is that on purpose?

Either start at a higher amount of XP (absolutely necessary if you're using the 1,200xp all-or-nothing version), or require the 500xp at character creation with the option of enhancing the effect for an added 100xp once per Rank beyond Rank 1. This has the advantage of allowing the ability to grow more useful as the character advances (at Rank 1, the penalties almost exceed the benefits).

In our group we had someone take the 1200 points version, while still starting at 500XP.

We ruled that the player has a 700 point XP "debt" which he has to pay off. So whenever we get awarded any XP, he uses half of what he gets to pay off his debt and the other half can be used to buy advancements.