Source is the location of the referenced image via a relative path. If Krita cannot find the source, it will ask the user to reselect the image for it.
Reference images, weirdly enough, are not in the document name folder, instead they're top-level in the reference_images folder.
Projection Background
~~~~~~~~~~~~~~~~~~~~~
::
<ProjectionBackgroundColor ColorData="oKu8/w=="/>
The projection background is an 8bit sRGB color encoded in base64. This is the color that is shown between the lowest of the layers and the transparency checkers.
Palettes
~~~~~~~~
::
<palettes>
<palette filename="flower_palette_embedded.kpl"/>
</palettes>
The palettes are stored as KPL files as palettes/palete_name.kpl.