Hole size is really about how small you can go while maintaining accuracy, what your viewing distance is, and how well your material can hold its shape. If you make the holes too close, you run the risk of not leaving enough surface material or having it break. Melamine will chip, whereas an engraveable plastic will hold its surface layer better.
The project size limit is mostly based on how flat your material and cutting surface are. A small project will be less likely to warp or sag, and depth accuracy affects the quality of the result. If you have a solid bed with a vacuum hold down, you could probably cut much larger pieces than someone with a homemade machine.
I generally try to set my holes to be about 5 to 6mm diameter, offset odd lines, and use a spacing of 4 to 5mm. With the offset you can get away with slightly tighter spacing. I usually cut pieces that are about 24" x 18" (600mm x 400mm) and find that hole size to project size ratio works pretty well on my machine. The XCarve, being smaller than mine, is probably a little more rigid, so you might get away with smaller holes, particularly if you're using a narrower bit, like a 45 deg.