I tried to do XBAP development for about 18 months full time for a fairly ambitious project and absolutely hated it.
There are many undocumented limitations, such as not being able to set a custom mouse cursor. MS forgot to tell anyone about that one and a hundred others. I’m very averse to sandboxing now because of that minefield.
Combined that with the deployment nightmares (still to this day there’s not a good story for Firefox, even after 3.5 SP1 there’s still problems), I honestly believe that MS is doing everything it can to kill XBAPs in favor of Silverlight. I don’t blame them, just wish they’d have been more open about it.
I would avoid XBAPs like the plague. It’s a dead scenario with no future. Wouldn’t be the least bit surprised if they were deprecated soon.