Ahh, should have kept looking a little longer. I needed to change the actual recipe as well. Works fine now

.
<Recipe Name="GenerateClassT4" Bound="false">
<xi:include href="TypeAlias.xml" xmlns:xi="http://www.w3.org/2001/XInclude" />
<Caption>Do stuff with XML</Caption>
<HostData>
<Icon ID="689" />
<CommandBar Name="Item" />
</HostData>
...