Besides the fact that the Clio 172 does absoultely nothing for me in the desirability stakes, I'd still have the Xsara all day long.
I'm a great fan of cars that punch well above their price tag and general expectations, and the Xsara does this absoultely perfectly. It is worth next to nothing because it is regarded as being an ugly 306 GTI-6, without the Six speed box. I ask why is that such a bad thing? The GTI-6 is regarded by many as one of the best handling cars ever made! No, the Xsara is not as good handling as the GTI-6, but it will upset 97% of cars you'll meet on your local winding B Road. And more importantly than that, I'm certain that it'll put a smile on your face, the No.1 job for ANY Hot Hatchback.
The 16V engine in the Xsara is an absolute gem. Below 3500RPM it'll potter around with as much manners as a Micra, with still enough low RPM 'poke' to keep you moving, wind it past 3,500RPM and it wakes up, pulling hard and fast to about 6,500RPM and then the power noticeably begins to trail off... The good news is all you have to do is dip the clutch, wiggle the gear lever a bit and you're right back in the power band, screaming towards the redline again

. I know that the engine doesn't necessary 'make' a Hot-Hatch, but I'm sure as proven with Type-R Hondas, it certainly helps!.
Apart from image, I cannot think of a single downside for a VTS. No, seriously:
Cheap - You'll struggle to find a car of similar age and performance for the money
Reliable - If it has had it's cambelt changed that the correct intervals they are damn near bullet proof as you'd expect from a circa £1000 car.
Spacious - It's a 'family sized' hatchback, as opposed to the clio which I could see getting rather cramped
Quick - 150BHP per tonne isn't going to set the world on fire, but you could do worse.
Economical - I've heard as much as 35MPG on a run in a VTS (although the economy does suffer a tad if you do a lot of short journeys

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The 'image' problem with the Xsara is why it is so attractive, If they were the same price as a 306 GTI-6 in a similar condition I'd run for the hills. Yes, it is ugly, the interior combos are hideous and the GTI-6 is a better handling car, but because of the image the VTS has (which people are doing a great job explaining for me in this thread so far) they are worth next to nothing for something that is fundamentally a great car.