A theoretical analysis of laser-driven collisional ejection of inner-shell electrons is presented to explain the previously observed anomalous kilovolt L-shell x-ray emission spectra from atomic Xe cluster targets excited by intense sub-picosecond 248 nm ultraviolet radiation (McPherson A et al 1994 Nature 370 631-4). For incident ponderomotively-driven electrons photoionized by strong above threshold ionization, the collisional ejection mechanism is shown to be highly l-state and significantly n-state (i.e. radially) selective for time periods shorter than the collisional dephasing time of the photoionized electronic wavefunction. The resulting preference for the collisional ejection of 2p electrons by an ionized 4p state produces the measured anomalous Xe(L) emission which contains direct evidence for (i) the generation of Xe²⁷⁺(2p⁵3d¹⁰) and Xe²⁸⁺(2p⁵3d⁹) ions exhibiting inner-shell population inversion and (ii) a coherent correlated electron state collision responsible for the production of double 2p vacancies. For longer time periods, the selectivity of this coherent impact ionization mechanism is rapidly reduced by the combined effects of intrinsic quantum mechanical spreading and dephasing - in agreement with the experimentally observed and extremely strong ~λ^-6 pump-laser wavelength dependence of the efficiency of inner-shell (2p) vacancy production in Xe clusters excited in underdense plasmas (Kondo K et al 1997 J. Phys. B: At. Mol. Opt. Phys. 30 2707-16).