what is it in Lightroom that is causing my dng files to be completely replaced by blank xmp files? This is concerning because if I don`t have my dng files elsewhere then my entire shoot is lost. Thanks

For DNG files Lightroom writes the XMP data direclty into the files, not as sidecars. Whereas LRTimelapse works with sidecar XMPs because, that's much faster, has advantages for backup etc.
This doesn't affect the workflow at all, because when reading the XMP data, both programs will use whichever XMP information is younger - the embedded one or the sidecar one.