I own both. So let me just say this:
1. its only $70 more than the 32 gb 3g Ipad. When it is upgraded to 4g it will kill any ipad 2 3g speeds. BTW they just released a wifi only version of the Xoom and its the same price as the ipad 2. But with better cameras.
2. If i want to watch a good movie i do what i do on my Ipad... I drag it over and play it. Netflix doesn't have the greatest selection and i refuse to pay for Hulu +. BUT on the Xoom i can go on many movie sites, megavideo, ch131; etc. and stream movies or tv shows with Flash.
3. Flash.
4. Chrome web browser kicks ass. Its actually depressing when i use the Ipad's browser. Tabs are amazing.
5. Yes very lacking in Apps. But flash does compensate for the lack of video apps. And the web browser compensates for a lot of apps. For example, I don't need a best buy app, amazon app, facebook app; etc. B.c i can access the full webpage pretty easily in the chrome browser.
Now it depends on the user. I love both. The both have their purposes for me. Now will it fail? No i don't think so. It might not do the shear volume that iOS devices do. However, does it really need to in order to be a success? NO. Just like the Droid X doesn't outsell the iphone. Just like the Droid incredible or galaxy S series doesn't outsell the iphone. COMBINED they outsell it. and if you keep up with tech, you know that their are TONS of android tablets coming out. Creating more competition, lower price points ($349 wifi galaxy tab), and variety of product (Not everyone wants a 10").
http://www.bgr.com/2011/04/06/the-motorola-xoom-is-most-certainly-not-a-flop/