Xenophon said Blatter's denials of crisis within FIFA were akin to the "Black Knight" in the British comedy troupe's 1975 film "Monty Python and the Holy Grail," who has his legs and arms hacked off in a sword-fight but called it a "flesh wound."
"Sepp looked completely in denial. He looked like Monty Python's 'Black Knight'," the independent senator said in a media release on Tuesday. "FIFA hasn't just received a 'flesh wound'. It's on the ground bleeding profusely."
Blatter denied FIFA's World Cup bidding process had become compromised at a bizarre media conference on Monday, publicly backing 2022 hosts Qatar amid accusations the rich Gulf state had bought the hosting rights.
Already under the spotlight over allegations that its executives had bribed FIFA delegates for their votes, Qatar was further embarrassed when suspended vice-president Jack Warner produced an email in which general secretary Jerome Valcke spoke of how the country had "bought" the World Cup.
Valcke later issued a statement denying he meant to suggest anything corrupt about the Qatar bid. Qatar has denied any impropriety.
Xenophon, who described the media conference as "bizarre", reiterated his calls on Monday for FIFA to "refund" the A$46 million ($49.17 million) Australia spent on its failed bid for the 2022 World Cup.
Australia, awarded the 2000 summer Olympic Games, drew just one vote, prompting cries of foul play and criticism of the federal government for financially backing the bid.
"Australians love to win, but we don't mind losing as long as the game is fair," he said. "It is now quite clear that we could never have won the rights to host the 2022 World Cup because it was fixed."
Football remains a small player in Australia's crowded sports market next to indigenous Australian Rules football and rugby league, but the FIFA scandal has touched a raw nerve among the sport's backers.
"The bidding process itself will need to change before nations have the confidence to invest the large sums required to bid for the World Cup again," Australia's federal sports minister Mark Arbib told local media on Tuesday.
Arbib likened the scandal to that which engulfed the 2002 Winter Games when International Olympic Committee delegates were found guilty of taking bribes in exchange for votes for the winning Salt Lake City bid.
"FIFA will need to undergo a reform process similar to what the International Olympic Committee undertook after Salt Lake City."
