I would say the Xserve.

There is a huge difference between the Xserve and the PowerMacs.
The Xserve is server HW, you can get special server deals like the spare parts kits and 24hours reponse time from Apple etc.

Buuut, at the school where I work, most of our servers are hosted on PowerMac G4's, and that works great. We host around 15 websites, 2 pretty busy fileservers, mail(POP, IMAP for webmail), 3 databases etc. We don't really have any problems with our old PowerMacs, but it all depends on traffic. If you want to handle as much traffic as possible, get a PowerMac G5, if you want stable decent server HW with as little downtime as possible, get the Xserve. We are currently pretty vulnerable to HW failures. And, when such things happens, we will have a 2-3 hours of downtime(maybe more). The Xserve(with spare parts kits) could bring this down to almost the same as our response time, which is usually a couple of minutes(depending on the problem of course).

You also have the opportunity to rackmount the Xserve and it also comes with special software for monitoring and clustering that the PowerMacs doesn't have.

The Xserve is the serious server HW, a PowerMac will probably do just fine but lacks in certain aspects. It all depends on your needs and traffic. An contrary to what people might tell you, Macs can handle A LOT of traffic, and will not be squashed like bugs by heavy load.
Unless you have a server-room full of old iMacs that is.

Also, we are currently on 100% SCSI on our server-room, but we have done the math with Apple, and the Xserves IDE interface/drives will handle our fileservers better than our current SCSI setup. Stability and minimum downtime is provided trough hot-pluggable drive modules + RAID.

nikon