It's really unclear what you're looking for. There aren't really multiple "methods" of disjoining a client computer from a domain. (I mean, sure, you could use NETDOM versus the GUI, but it's still calling the same APIs...)
Being joined to a domain isn't anything magical. Applications and data on the PC will remain intact (though software that was "pushed" with Group Policy may uninstall automatically if it was selected to uninstall when it falls out of scope of management.)
If you disjoin the Windows XP client from the domain you'll no longer be able to logon with any domain user accounts. Any local user profiles that were associated with domain user accounts will become unavailable. That would seem to qualify as "loss of application functionality" to me. Granted, nothing will be lost-- you can re-join the domain and everything will go back to functioning as it did before. It's just inconvenient.
You could create a local user account on the machine with the same username and password as a valid domain user account. This would allow fairly transparent access to server computers in the domain (a "poor man's domain trust relationship", often used on the "Home" versions of operating systems when needing to access domain resources), but that won't get you the existing domain user's locally-stored user profile.
You can "migrate" a user profile from one account to another, but there is not a documented and "supported" operation to end up with the new local profile having the same path in "C:\Documents and Settings" as the old profile, to my knowledge. Given the number of applications that I've seen that, stupidly, store references to the "C:\Documents and Settings..." folder for the user's profile, I'd say that any "solution" that doesn't preserve that path for the new local account is going to result in some loss of functionality.