The aim of the root element refactoring is to provide a way for the staged model data handlers and portlet data handlers to reach the portlet-data.xml file's root element from anywhere in the code.
In some cases if a portlet-data.xml is organized in a flat structure like this example:
First the XYPortletDataHandler picks up the processing and passes the control flow over the staged model data handler for the test entity. As the test entity staged model data handler wants to import the referenced "different entities" it couldn't reach the grouping xml element since the staged model data handler cannot reach the root element for the portlet-data.xml file.
Most of the portlets are organized in this flat structure, so the root element should be accessible to the participants in the staging.
There is also one bug related to the portlet-data.xml caused in this ticket:
With the changes in the mentioned ticket, there is no xml opening tag being generated in the portlet-data.xml files, so when trying to import the portlet data handlers will bypass the import because the xml file is not valid.