I'm currently using raspbmc on my 256mb ram model B. It's reasonably smooth but you definitely don't get the same performance out of it as you do with a PC. There are more than a few random crashes but if you don't mind the hassle then it's a nice option. If you're going to go this route then I'd suggest installing XBMC to a USB and not to the SD card and stay away from SAMBA shares, NFS is probably the best option here (I recommend this for all XBMC setups not just raspberry pi). It is smooth enough to be a daily driver and hopefully the random crashes will lesson now that frodo is out of beta.