I would almost always prefer the Xeon over the i7 for a virtualization load - the Xeons are server class CPUs, and generally have MUCH more L1/L2 cache.
That being said, the i7 is Nehalem based, which is a solid 10-15% performance bump.
The i7 DOES have VT.
I'd say your choice would depend on workload - if you plan on running a just a few (2 ish) multi-vCPU workloads, I'd go for the i7. If you plan to run more single vCPU workloads (5 ish), I'd go Xeon.
--Matt
VCP, vExpert, Unix Geek