According to the file datestamps on the CTAN, the xfrac package was last updated on 12/29/2011. I suppose it's possible that if you ran tlmgr update --all since then, something migh have gone wrong in the update process without you noticing.
Try running
tlmgr install --reinstall xfrac
from the command line and see if this brings the needed relief. You may have to be in the directory c:\texlive\2011\bin\win32 (or wherever tlmgr.bat is located on your Windows system).
Addendum: I see from your comment that your current CTAN repository is ctan.cms.math.ca. For what it's worth, the xfrac package seems to be available at the CTAN mirror site mirrors.med.harvard.edu (and probably many other CTAN mirror sites too). You might want to try running the command
tlmgr option repository http://mirror.ctan.org/systems/texlive/tlnet
or
tlmgr option repository http://mirrors.med.harvard.edu/ctan/systems/texlive/tlnet
from the command line (to reset tlmgr's default CTAN repository information) before (re)running the tlmgr install ... command I suggested earlier.
xfrac.styif you leave off the\usepackage(microtype}instruction? – Mico Jan 13 '12 at 21:37amsmathandmicrotypepackages fine, but for some reasonxfracis giving it trouble. – Andriy Drozdyuk Jan 13 '12 at 21:39tlmgr install --reinstall xfracfrom your command prompt. – Werner Jan 13 '12 at 21:41tlmgr: package repository http://ctan.cms.math.ca/tex-archive/systems/texlive/tlnet package xfrac not present in package repository.– Andriy Drozdyuk Jan 13 '12 at 21:46tlmgr install --reinstall l3packages. – Werner Jan 13 '12 at 21:52