LSD works great on xdrive. I have about 10 days on my wavetrac and I am kicking myself I didn't do it earlier. You will need to code off the e-diff and other nannies, which you can see how to do on my blog:
http://www.onelapx1.com/blog
Xdrive is really fantastic on track with a LSD; it's faster than RWD for sure. The cars I can keep up with are pretty ridiculous and I make up so much time coming out of turns at full throttle.