CPUs using less power generate less heat and require less cooling. In a datacenter packed full of equipment, this matters a lot.
Xeon CPUs typically use a different socket than the mainline consumer chips, but they are not always different than the high-performance consumer/workstation/server chips. Core i7 and the latest Xeons (3500/5500-series) all use the same socket, LGA 1366 - the CPUs are very similar. There are Xeon models that have very similar specifications to the i7 CPUs. The Xeons have ECC support. The 5500-series Xeons have an extra QuickPath link and can be used in a dual processor configuration. The LGA 1366 Xeons are available in a wide range: 60-130W TDP, 1.86-3.2 GHz, dual/quad/quad+HT. All LGA 1366 CPUs have triple-channel memory controllers. The cheapest 5500-series Xeons are actually cheaper than the cheapest i7.
The X58 is designated for single-processor systems, and the 5500/5520 are designated for dual-processor systems. I think the X58 has more available bandwidth for PCI-e devices.
, any LGA 1366 CPU should work with either chipset.
The Core i5 is the mainstream desktop CPU; it will use a different (smaller) socket when it becomes available.
In my opinion, the new Xeons or i7 aren't worth it yet unless you absolutely need the highest performance possible or you need some of the features available with these CPUs/chipsets. I would like a Xeon/i7 based system for extended page tables and VT-d, two features that make virtualization better.