Xerri told the Tribunal of his "brain fade" involving Essendon's Andrew McGrath - and Dillon agrees with the Kangaroo ruckman.
"It was clear from the Tribunal last night that that's not an act that we want to see on our AFL grounds," Dillon told reporters on Tuesday.
"Tristan put his hand up and he's acknowledged he's done the wrong thing.
"And I think the Tribunal balanced both sides of the argument well and I'm comfortable with the three weeks."
The AFL boss was in Adelaide on Tuesday amid negotiations with South Australia on extending their host status for Gather Round.
SA Premier Peter Malinauskas's deal with the AFL to host the round when all 18 clubs play in Adelaide and the Barossa Valley expires after the April 9-12 edition.
Dillon was open to a longer-term deal for SA.
"We discuss that with the government every year, we are working through how that might look," he said.
"I would really like to get it done as soon as possible because there's so much interest in it.
"But it is a complicated negotiation. There's lots of people that we need to consult with, particularly our clubs and our players, but we're having really constructive discussions with the government."
Malinauskas declined to put a timeline on extension talks.
"I am confident that there's enough goodwill that exists between the state government and the AFL to be able to make sure we get the right outcome for footy fans and the people of our state that have invested so heavily in bringing this concept to life," the premier said.
Malinauskas was also lobbying for SA to host a State of Origin game after the concept was rebirthed last February in Perth between WA and Victoria.
Dillon said the league was negotiating with both the WA and SA governments over Origin's short-term future.
"What we want to do with Origin is make sure that we have a plan for the next three to five years so we're working through that at the moment," Dillon said.
"As we move forward with Origin, there's a place for South Australia.
"I'm not saying that they (WA) would lose that ... they were really supportive of us getting Origin off the ground."
Meanwhile, the AFL has confirmed the introduction of a salary cap in the AFLW from next season.
The new model replaces the existing four-tier payment system from 2027 onwards.
It was also announced the women's competition would be overseen by Laura Kane, who has been handed a new role as executive general manager of AFLW, health and football operations.
The move comes after months of reports of simmering tension between Kane and former Brisbane Lions chief executive Greg Swann, who joined the AFL as executive general manager of football performance in July last year.
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