I don't think it is all that surprising that Ella was a Colonel-in-Chief. It was the norm for Grand Dukes and Grand Duchesses, though perhaps what James is saying that he is surprised that she continued in this role after entering religion.
In the British context, the Royal Scots Dragoon Guards (successor regiment to the Royal Scots Greys) are proud of their association with Nicholas II. All ranks wear black patches behind the cap badge in mourning for him and the Imperial Anthem is played at Officers' Mess dinners. Franz Josef was Colonel-in-Chief of the King's Dragoon Guards, and their successor regiment, the Queen's Dragoon Guards, continue to wear the Habsburg double eagle as a cap badge.
The Kaiser was, of course, Colonel-in-Chief of the Royal Dragoons, but I'm not sure what view the Blues & Royals take of that!
Ann