I'm working in a team whichs development process is heavily influenced by XP and other Agile methods (such as Scrum). It's working quite well, in my experience, and I know that there are a lot of other teams out there doing similar things.
Do you have any more specific questions?
The soul is dyed the color of its thoughts. Think only on those things that are in line with your principles and can bear the light of day. The content of your character is your choice. Day by day, what you do is who you become. Your integrity is your destiny - it is the light that guides your way. - Heraclitus
We also use a process that is pretty close to the Extreme Programming model - more experienced developer working with and coaching less experienced guys, flexible design and constant dialog with customers, etc etc, the approach works very well for us.
We are in a smaller business unit with a very specialist product. There aren't so many lines of code, and it is possible (although not practical) for one person to have a good understanding of all the parts of the system. The flexibility of our approach allows us to meet customers demands in a rapidly changing marketplace - for us it is ideal, and actually a refreshing way to work. I would imagine that for larger units they would need to make a more formal attempt to implement this extreme programming paradigm - breaking groups down and such, but I can't see why it wouldn't work. I'm a convert. [ October 31, 2006: Message edited by: Becca ]