The correct answer is $\boxed{\text{X}}$.
The series is a simple alternating repetition of the letters A-Z, with the letters X and Y inserted between each pair of letters. The 1000th position in the series is therefore the 500th position in the first half of the series, which is occupied by the letter X.
Here is a more detailed explanation of the series:
The series starts with the letters A, B, C, and D. After D, the letters X and Y are inserted, so the next four letters are X, Y, A, and B. This pattern continues, with the letters X and Y being inserted between each pair of letters.
The 1000th position in the series is the 500th position in the first half of the series. The first half of the series consists of the letters A-Z, with the letters X and Y inserted between each pair of letters. The 500th position in the first half of the series is therefore occupied by the letter X.
Therefore, the letter that occupies the 1000th position in the series is $\boxed{\text{X}}$.