I agree with you on the first two terms, and neither of you on the third term. It is easier to think of if you use a negative exponent for the third term... if you factor out x2 you are subtracting 2 from each exponent of x... you would have X-2-2 = X-4 and 1/x4 for the third term. The book's answer would be correct if they had simply an X, not X2, as the factor.
I prefer to teach this kind of factoring by dividing each term by the desired factor, X2 in this case. When you get to the fraction 1/x you have to divide by using the KeepChangeFlip model and you will get the right answer.