And HEIF are automatically converted to JXL for iOS 17?

Yes!

I’m not clear on the benefit of doing that. Won’t you end up with worse quality from the transcode and have equivalent file size?

Do give it a try! In our tests we found that sizes are smaller and encoding of HEIF takes very very long time. Remember, we provide bunch of other things like image resize and crop etc so we always end up encoding image again. Encoding in HEIF is very slow.