And I've never tried it but I've heard XP mode (or any virtual OS) is basically just a memory hog.
Sounds like you've heard wrong.
VM's are very, very common, even servers are virtualized now; and since most CPU's support HW virtualization, they run almost as well as a real PC.
I use Virtualbox to run Ubuntu on my PC, and it even supports 2d/3d acceleration, it's quite fast, although I don't have XP mode, as I have Home Premium on my desktop.
I do have it on my laptop, and it just like XP on any other PC, although I don't care for Virtual PC, but it's a 'free' license of XP, I'm not complaining too loudly.
As for actual uses, we use XP mode at work, to connect to an LCMS, that normally uses SW that isn't Win7 compatible. You'd never know it was running under a VM (and as an added bonus, when the SW does crash, and you have to restart the instrument and SW, you don't have to restart the physical PC, just the VM).