Nahuatl has two sibilant fricatives, now pronounced something like [s] and [ʃ]. The standard orthography was developed by Spanish colonizers, who wrote /ʃ/ as x, and /s/ as c before a front vowel, z elsewhere. (There's also [t͡ʃ], written ch.)
But since all stages of Spanish definitely had s for [s], it seems clear that the sound the first transcribers heard definitely wasn't [s].
Do we know what this sound was? There unfortunately weren't trained linguists around transcribing Classical Nahuatl, but the Spanish transcription might be enough to make a good guess.