I have had a RP now for around three weeks or so and I have found....
All HD material played fine, 720p and 1080p. I enabled DTS passthrough as the TV supports it.
My Sandisk Extreme 16GB SD card works a treat, even when overclocked. It does not need to be that big, as I'm streaming (wired) from my Server but I had it "spare" from my camera bag. I would imagine a 2GB card (fast) would be fine.
There was absolutely no advantage (performance wise) from me running it on the above card or a super fast USB 3 stick. I imagine that those who get an improvement is due to using a slower SD card. As I have had no SD card corruption, as yet, then I am fine with continuing to use that.
I have overclocked it to 900mhz and I have found that helps with the GUI of XBMC, I did not seem to have an issue with running at std clocks for any HD material. I use the default Confluence skin. Even the bigger 1080p with the larger bit rates seemed to be fine.
I am using OpenELEC build 3.0.5 at the moment. I have tried Raspbmc but not Xbian. OpenElec runs well with only slight delays when opening certain menus etc, but that might be down to my large collection of media files indexed.
I did buy myself a decent power supply (about £8), clear case (less than £2) and a set of heatsinks (about £2.50) - but I'm not sure how effective they are as I never tried the Pi without them.
I was uncertain on how well the Pi would suit my needs for a second HTPC, without the costs of building a more traditional PC type box, and it does surprise me on how well it performs.