some 32-bit software might break, but I haven't seen that myself. My guess is that it'd mainly be things that's very dirty, and would have already broken on 32bit XP on a 64bit CPU running on PAE mode with DEP turned on. Also, 16bit support is completely removed, this affects some old installers (yeah, 16bit installers for 32bit apps - wonderful).
I haven't been running 64bit for very long, but so far everything works just fine. While you generally don't need to upgrade 32bit apps (only sensible reason to do so is for apps that can take advantage of it), you will
need 64bit drivers for all your hardware, and that can
be a trouble for some peripherals.
You can run xp32 in a vm just fine (and surprisingly enough, you can even run xp64 in vmware on a xp32!), but it wouldn't make that much sense, unless you need 16bit stuff... since obviously vmware doesn't help much wrt. driver peripherals.
As for 64bit xp being slower, dunno... could have been when drivers where immature. Code size does
increase a bit, but not as badly as it could have, thanks the the instruction format (RIP-relative addressing rather than fixed 64bit offsets, for instance), but that is still pretty little, and data files (which is the size hog) don't magically grow