I thought it could be done from the Browser on the XOOM, but it seems you need to do this from a normal computer, not a mobile device.
You may already know how to do this from a normal computer, but just in case...
From a computer, log into your google account and navigate to your google contacts (
https://mail.google.com/mail/contacts/ui/ContactManager).
There are three panes in this window. Your groups are in the left pane.
Click on the group name you want to change.
The contents of that group appears in the second pane.
The third pane has the name of the group in it. Above the name is a box that says "Edit." Click that and edit the name. Click save.
All done.