The 2000/2001 4-cylinder and base V6 came with 235/70-15 tires, which are pretty much 28x9.50 size. The V6 Utility package and 2000 SE got 265/70-15, 30x10.50, and the 2001 SE got 255/65-16 which are 29x10.0. Most 2000/2001 V6 Xterras have a 4.636 differential gear ratio and the 265/70-15 or 255/65-16 tires. From what I gather the dinky 235/70-15 tires come with a 4.3x differential gear ratio which offsets the higher revs/distance that result from the smaller tires.
Without changing the gear ratio, here's what you will get from lower-profile/smaller tires.
Pros:
A bit more off-the-line power from a stop.
A bit better steering turn-in response and handling, but not enough to make a difference.
Perhaps a cheaper tire cost by a few bucks.
Cons:
For every mile you travel, your entire driveline (bearings, axles, diffs, transfer case, transmission, and engine) will turn more revolutions. This will increase wear on all of the above plus your tires won't last as long, It will run your odometer up faster, drink more gas, and make for a noisier drive due to the higher RPMs.
Less sidewall means a harsher ride.
Your Xterra will look kinda dumb with more space in the wheel openings.
The only way to get lower profile tires without any of the above is to go with a larger wheel size at the same time. Rather than try to elaborate, just go here:
http://www.tirerack.com/tires/tirete...al/plusone.jsp
Note that as wheel diameter goes up, so does tire cost. A 265/65-17 tire is about 31x10.50 inches in size, it just has a larger hole in the middle vs. a 265/70-16 which is also pretty much 31x10.50. Comparing the same tire brand and model in the two sizes, they're both the same diameter and width, but the one for the 17" wheel will cost a fair bit more.
Brent