VMWare Rolls Out Their Largest Product Release
Xen's performance overhead is about 3-4% of the CPU. So sure things could be improved. But even if VMWare had no overhead (which it probably does) the performance difference is not something you'd really notice unless doing technical benchmarks.
In our hosting setup we have found that Xen is reliable, performs well, and the VPSs are about as functionaly identical as a 'real' dedicated server as you can get.
If your needs happen to be running Linux virtual machines and you're comfortable with the Xen tools then Xen is a great product. Glad to hear VMWare is also improving their products. Competition = good.
Xen-based Linux hosting and proud of it