[...]
If those two modes only differ in software complexity but we are not
able to support only the simpler one and we have support for the more
complicated (standard mode) anyways, we know that standard mode
can handle or the cases while dynamic mode cannot, we also know that
dynamic mode is broken on some versions of the core, why do we actually
keep support for dynamic mode?
If I recall it right, the dynamic mode was supposed to handle transfers longer than 255 Bytes, which the core cannot do in Standard mode. It is needed e.g. by Atmel MXT touch controller. I spent a lot of time debugging the race conditions in the XIIC, which I ultimately fixed (the patches are upstream), but the long transfers I rather fixed in the MXT driver instead.
I also recall there was supposed to be some update for the XIIC core coming with newer vivado, but I might be wrong about that.