"I think that it is the ability of IRS to use nav aids to determine position."
Actually, some of the later INS's used DME data to update position.
Please note, IRU's are very basic units and really don't use radio navaid data. All the mixing and prioritizing of navaid data on an IRS-equipped aircraft is usually done by Flight Management Computers. INS's are complete navigation units and do all the navigation number crunching internally.
"additionally the 'reference' bit refers to the ability of IRS to provide accurate pitch, bank and IVSI inputs to the avionics."
[Steve] Older generation airliners still made use of INS's for pitch, roll and (short term) compass indications part. The INS's also provided data to some airplane systems (e.g. Autopilot). Only the standby instruments used the old internal gyros (at least on the aircraft I worked on). Probably the main reason for calling laser gyro boxes "reference units" is for reasons stated above (It has no real Inertial "Navigation" capabilities in the sense of getting you from point A to point B).
Hope this helps.
Rgds.
Q.