Just to confirm. Get the Core 2 Duo.
My single 1.66GHz Core Duo smacks my Dual Xeon into the middle of last month. Even allowing for the fact that I have the older-model Prestonia Xeons by halving the frame times (seems like a reasonable approach), it still wins. Even allowing for the fact I'm under-utilising my Xeons by taking a third off again, it still (just) wins.
Now take a Core 2 Duo which performs about 20% faster than the equivalent Core Duo (Intel figures), ramp up the clock, bear in mind the Core 2 Duos can score fantastic overclocks, and you'll be smashing those Xeons into last year.
PS - XP Pro allows two sockets. I'm not sure if it imposes a limit on cores/socket or not.