Do you believe X# is another name for F#? If C# is not functional, then how can X# be an extension of C# (or based on C#)?
I'd like to think that X# is based on functional programming. The benefits of that paradigm for XML processing are significant. However, I suspect that the functional style might be seen as too far off the mainstream. If that is so, a blend - C# plus some "embedded" functional language might be a good compromise. A bit like VB with embedded SQL. :-)
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