+1 on low level formatting the drive. And I'll explain why...
These old MFM drives are stepper positioned, like a floppy drive. The heads are attached to a stepper motor, and for each pulse, move foreward/backward a track. This is a very simple, pretty reliable method of positioning the heads over a givin track.
Over time, the stepper motor 'wears' a bit, or rather, drifts out of adjustment the tiniest bit. Eventually, this translates to the head being slightly mispositioned over the data tracks of the disk, so it no longer lines up perfectly with the tracks themselves. It'll still work, but it might be slow, or throw up errors. Occasionally, you'll find a drive that works perfeclty if layed flat, but gives errors if you put it up on end, as the 'slop' in the stepper is being exacerbated by the gravity.
Low level formatting a disk involves stepping forward, one track at a time, and writing out all the track boundary information. It'll write the tracks in the positions that the heads now travel to, and it'll work fine.
Now, modern, voice coil positioned hard drives don't have this problem. Rather than relying on a stepper for positioning (step forward 40 tracks.... I'm here! I hope...), they use a set of positioning tracks on the media itself - the head gets pulsed to move forward, and it stops when it gets over the proper track. This is much, much faster, and more reliable from a data integrity point of view - as the heads are always going to be in the right place, since they use information on the media itself to position themselves. But, the other side to this is that voice coil drives can't be low level formatted in the traditional sense. They can't rewrite their position information themselves, because, well, how would they position themselves to the next track, if the positioning information is gone?
All technical discussions aside, I would recommend low level formatting the disk. This is a destructive process, and will erase all data on the drive. A low level format is NOT a DOS format - after low level formatting the drive, you'll need to create a partition table, DOS partition, and format the drive from DOS again.
That said, there is a tool that can low level format the drive right out from under the data. It's called Spinrite. Spinrite II is the best version to use for your XT. I still recommend backing up anything important, but Spinrite actually does work quite well. I've yet to have it lose any data. It can also compute the best interleave ratio for the drive, and format it accordingly.
-Ian