How to set up `xdg-open` to use Nautilus for `gvfs` paths?

From man xdg-open

xdg-open opens a file or URL in the user's preferred application. If a URL is provided the URL will be opened in the user's preferred web browser.
...
xdg-open supports file, ftp, http and https URLs.

The man page states that as long as the target is a recognized URL it will always use a web browser. This looks like what you want is not possible
_{(apart from registering nautilus as your favourite web browser whis is a bad idea™ )}