The problem with the Xoom is that it is bleeding edge. Undoubtedly hardware-wise it is superior to the Ipad2.
HOWEVER.....hardware is only one part of the equation and I implore you to think about that.
Xoom is the first tablet to run Android version 3. There's a lot of reports of user's are experiencing crashes. Their sales have been very weak with analysts criticising the Honeycomb OS. Compare that to the ipad 2 which is flying off the shelves and you'd be lucky to get one.
And perhaps THE most important. With Honeycomb being new, there are not so many applications available. The ipad is more mature and there are a LOT more apps. And that's where you will get the better experience.
In many ways its a real shame. I really want to like Android. I love how customisable it is. I love what developers are doing and I do hate the way Apple control everything.
But at this moment in time, Android is only good for geeks who don't mind being on the bleeding edge. Don't mind if it crashes intermittently. Don't mind rooting it and hacking it to make it do things. But if like me you'd rather have something that just works......buy an Apple.
Lastly, if your budget can stretch to it, I'd get the 32GB. I have 16GB and it's fine for 99% of the time. I did once travel long haul and had to delete some large games to fit about 20 hours worth of films/TV on so it all depends on your needs. Oh and personally I don't see the point in the 3G version unless you plan to travel a lot with it. I have an iphone too so if I need to surf whilst on the move, I use that. I'd rather not tattoo "MUG ME!" on my forehead by using an ipad.