OSX vs. Linux for an Oracle server
For a database server running Oracle, you might be better off with Linux than OSX - Oracle on OSX is at least one major revision behind Linux, which suggests that it's probably not going to get a high support priority from Oracle. Oracle has a history of treating minority platforms as second class citizens, and their reputation for this goes right back to the 1980s.
Note that Oracle only certify their Linux builds on certain commercially supported distributions such as RHEL. You will need to buy a licence for a supported version to qualify for Oracle support. Fortunately most server vendors offer this an an option (typically RHEL or SLES) with an OEM pricing deal if you buy it with the server. Note that you can install Oracle on other distributions if you have the right version of glibc and binutils installed, but this type of configuration is not supported by Oracle.
As for performance, a Xeon is a fast CPU. Oracle will handle big workloads on quite modest hardware. The product dates back to the 1980s and a decent sized Oracle/VMS installation of the era chould support transactional workloads for hundreds or thousands of users on hardware with much lower specification than a modern server.
A modern server has plenty of CPU for database work, but you will want to have the disk set up properly to avoid performance issues. Disk layout mistakes such as putting logs on a busy shared volume can cause severe performance issues on a database. For Oracle, this means you will want (at least) separate physical disk volumes (even if they are only mirrored pairs) for data, logs, rollback segment and possibly temp, along with your system disks.
The XServe is only a 1U box and has limited space for internal disk storage. It will only take three disks, so you would need an external disk array to do this with an XServe. For a database server you might be better off with a 2U box like a HP DL380. Modern boxes of this type can take up to 16 disks internally without needing an external disk array.
A few notes about web applications (if applicable)
For security reasons you will be best off with your web server on a separate box. Exposed databases on internet facing servers are a security risk. The database listener port should be firewalled off from the open internet, so you will want an additional web server with a separate IP address.
Another reason for having a separate web server is that you don't want to pay Oracle licencing fees for CPU capacity that isn't running Oracle. Planning for success, you may also want to configure and tune your web server differently to your database server.
If you want, your web server could be an XServe. If your software is OSX specific or you want to use a mac as a development box this might be a good choice. Otherwise there's probably no compelling reason to use an XServe for this.
Costs
Note that the Oracle licencing costs will probably outweigh the cost of hardware, although there are a few cheap deals for standard edition that aren't too expensive. Buy Oracle licencing for the smallest amount of CPU you need and don't expand the database server until you need the capacity.
