(a | b & Xp) here, I have expanded this to
(a | (b&Xp) ) = (a | b) & (a | Xp ) = (a & a) | (a & Xp) | (b & a) | (b & Xp)
= a | Xp(a | b) | b & a = Xp(a | b ) | a (b | a )
= a | Xp( a | b)
So the transition of {p,q} will be
taking a | b then has to go to {p} , {p,q} .
taking a alone, it has to go to {},{p},{p,q},{q} . But in the figure it goes to only {q} and {}. Since to the {p} , {p,q} states with a | b, b can be either present or not , and the input (a | b) , (a), in which (a) is already covered in the (a | b) , that's why we are not repeating the transition for input (a) to {p}, {p,q} . Is the correct ?