They are pretty much the same OS, and it's very hard to say what one is better. Both are good, no question. I think your decision should be based on what is better for what you are doing. Know that and it can make your job easier. I really have not seen any comparisions between the two OS's that really mean much for day-to day use.
IMO, XP is simply a home version of Win2k. Neither is bad and it really boils down to personal preference, which is why you really need to know what you want.

I really do a alittle of everything. I game a little, I edit digital video, and photos. I also am on th net alot. I have read that they are essentially the same OS but why the extreme difference in system requirements. I have enough computer, 1ghz AMD geforce video card and all. My question I guess is - Why does XP require more than twice the system requirements than 2000 and is it worth the system resources hit if they are essentially the same OS?

In my opinion I would go with Windows 2000. The system requirements on Windows 2000 require a Pentium 133 with 64mb ram. XP is a 233 with 128Mb. I have found that windows 2000 runs just as fast if not faster than XP because the OS does not need as much resources memory wise.
 
Another reason why I would go with Windows 2000 is because with XP you can only install it so many times before M$ has to have you call them up and tell them what you are doing before giving you a new activation key. Also you can only make so many hardware changes before it deactivates itself. I found out that changing the duplex on my NIC was one change to them even though I never changed the NIC.
 
One thing that XP has on W2k is the bootup time. My PC with XP was 25 seconds, W2k was 35-40 seconds. BIG DEAL.

If you don't want to mess around with compatibility on some older games, WinXP is a bit better here. Other than that 2000 is just fine and much leaner in terms of middleware and more mature (3 SP Releases).