vs
Red-Eyes Flare Metal Dragon
Card Text: 2 Level 7 monsters
Cannot be destroyed by card effects while it has Xyz Material. While this card has Xyz Material, each time your opponent activates a card or effect, inflict 500 damage to your opponent immediately after it resolves. Once per turn, during either player’s turn: You can detach 1 Xyz Material from this card, then target 1 “Red-Eyes” Normal Monster in your Graveyard; Special Summon it.
Red-Eyes Black Dragon
Card Text: A ferocious dragon with a deadly attack.
The Verdict
Case 1: Player-A activates Red-Eyes Flare Metal Dragon‘s discard effect, Player-A detaches a Red-Eyes Black Dragon: Player-A is ONLY able to target the detached card if they already had another valid Red-Eyes target in their GY prior to activating the effect.
WINNER = Red-Eyes Flare Metal Dragon?
Why: The effect can not be activated in the first place unless the conditions for executing the effect are valid (i.e., there is already a “Red-Eyes” normal monster in the GY prior to activating the effect). Upon activation and card detachment, the detached card is considered to be in the GY and thus, it can be targeted and special summoned.