1. It depends how much RAM you can allocate to the virtual machine.
2. You will take a performance hit when you are in XP Mode, particularly when launching and shutting it down.
3. Bearing in mind it's a freebie from Microsoft, it is a cost effective way of running legacy programs that won't run under Windows 7.
4. Having used it myself, I'd recommend it as long as you don't expect Windows XP performance.
5. Having bought Windows 7 Pro, it would be a shame not to use XP Mode.
Windows XP Mode - Install and Setup