Hi,
Having used XP for several months now, I wouldn't go back. Once you get used to it (a couple of hours) its much smoother and more user friendly.
Re: compatibility. The biggest issue you'll have will be driver support if you've got older hardware. Microsoft have written tons of generic drivers and these generally seem to work ok, but not for ALL devices.
If you have an old printer, for instance. The generic driver from Microsoft may not give you all the functionality you once had. For example if your printer WAS capable of doublesided printing, after the upgrade it may not be...
I think there was a post about that exact problem recently, in fact.
re: compatibility on software. Its very good. Everything I use runs on it just fine. If there was something that didn't, then there is an option to specifically run it in "compatibility mode" where you can choose from Win95 Win98/ME, NT4 SP5 or 2000.
The only issue you'll probably have is installation. I HAVE come across games that wont install because it detects the OS is too new and bombs out.
I overcame the problem by having dual boot, installing under 98SE and running from XP. It worked fine.
Overall I would recommend moving to XP if your machine is reasonably powerful. I wouldn't bother if its barely in spec for XP, though.
Cheers,
Tim.