XPS cuts well on our hot wire machines. It cuts a bit slower because of it's density, but it's real clean on the edges when doing lettering, or faces when slabbing. It shouldn't be an issue which foam you use.
Typically you see EPS foam with hot wires because XPS usually doesn't come in larger blocks and thus is used mostly as is in thinner panels, not for architectural trim and the like. XPS also is a bit different with regard to the heated off-gases. It's not as toxic as some foams, but it's a tad worse than EPS from what I've heard. It uses different blowing (or expanding) agents when produced. EPS is very clean to cut (biologically speaking), and burns cleaner than wood.
Hope this helps,