I guess it depends on what kind of development you're doing - and on your tool set.
If you develop primarily on the MS stack and have access to a MSDN or similar subscription, I'd recommend that should you have a decently specified machine, install Ultimate x64 as the primary OS and then use Virtual PC to host other versions of Vista for testing etc.
This, of course, assumes that you're doing development of a kind that requires testing on the desktop. I do primarily web development but still find it useful to have a couple of Vista Business x86 virtual machines for testing different browsers and configurations.
The differences between Ultimate, Enterprise and Business seem negligible in my experience, but from what I've found there's nothing missing from Ultimate. Again, if you're using MSDN or Technet media, you'll find you can install Ultimate from the same ISO as the other 'consumer' editions - business and enterprise generally have different images. As other posters have mentioned, the more basic consumer offerings should be avoided because of the lack of Remote Desktop Support, IIS and a whole bunch of other bits.
I see no reason to stay with XP - I've used Vista in various flavours for development work since it went RTM. I've not had problems with drivers, or anything else for that matter, apart from some stuff very early on with NVidia cards on x64 - those problems were sorted very quickly though. Installing XP on a VPC in Vista is an absolute doddle if you need it.
You'll also find other advantages in Vista over a plain install of XP - the most significant being the behaviour of the Start key to launch applications. As any regular user (particularly one who like keyboard shortcuts) will tell you, it can be really difficult starting applications on XP when the need arises.