But I think you've answered your own question in your second paragraph:

More to the point, I see the browsers doing a better job on html 5 features than on xhtml features (like FireFox 1.5 and Safari 1.4 both supporting working canvas tags).

You live and die by what the browsers support. Keep an eye on the XHTML stuff, but if the browser support hasn't shaken out yet then don't break your neck trying to keep up with a moving target. Most of your customers aren't going to be on bleeding-edge browser anyway.

Of course, unless things change greatly in the next year or so, WinVista may throw a monkey wrench in your plans so keep an eye on Redmond too. New machines are mostly going to be bundled with whatever comes out of Redmond, so you'll have to have some level of support there (even if it's just a page that redirects to [link|http://download.mozilla.org|http://download.mozilla.org] ;-).

My $0.02. HTH a bit.

Cheers,
Scott.