The lens and focusing system perform very well. The lens displays very good edge-to-edge sharpness, albeit with a tendency to display a bit of magenta chromatic aberration on the sides, and the center focus looks great, especially when zoomed in tight. As usual, Canon's optical stabilizer works exceptionally well, even all the way out to 20x.
With Instant AF enabled, the autofocus works quickly, and the Push AF, which activates an Instant AF override in manual-focus mode, speeds manual focus considerably. As noted in the XH series' documentation, there's a bit of an autofocus lag in 24F and 30F modes; it's perceptible, but if you shoot a lot in those modes and use AF, your shooting rhythm should adapt after a while. Canon moved the Peaking and Magnify focusing aids out to the body of the camera--they were in the menu system in the XL H1--and you'll rely on them pretty heavily; the tiny, low-resolution LCD is pretty difficult to work with.
Canon provides seven gain levels: 36dB, 18dB, 12dB, 6dB, 3dB, 0dB, and -3dB (although, irritatingly, you can only program three on the L/M/H switch. At its lowest gain, video looks incredibly smooth, and even as high as 3dB you can shoot in low light with relatively little noise. At 12dB there's quite a bit of (mostly) luminance noise, but it doesn't really obscure much detail and you can shoot in near darkness. The quiet on-camera mic works pretty well in basic up-close-and-personal shooting, but you've got plenty of add-on options should your needs be more complex.
As you'd expect from camcorders in their class, the XH's produce excellent HD and SD video: sharp, saturated and smooth. The controversy that began with the XL H1 over the relative quality of Canon's 24F versus Panasonic's 24P--implemented by models such as the Panasonic AG-HVX200--continues, and applies equally to the XH series. To summarize: Panasonic's 24P is a full 720-line frame of video captured roughly every 1/24 second. Canon's 24F "fakes" progressive scan by slightly offsetting the vertical readout of the green CCD from those of the blue and red, generating a frame with 1.5x the lines of the 540-line field, or 810 lines, albeit ones using spatial rather than temporal interlace. As a result, the quality question arises: Do Canon's pseudo-progressive frames look the same as a true progressive frame or does one see artifacts?