As for floppy drives... high-density 5.25" 1.2MB and 3.5" 1.44MB floppy drives will work just fine in an XT-class system, as long as you have a controller specifically designed for this purpose, with an onboard ROM. Standard AT-type floppy controllers will not work since they don't have the onboard ROM, and standard XT-type controllers will only support low-density 360K and 720K floppies.
And as others have also mentioned, you can plug a 3.5" floppy drive into a standard XT-type floppy controller and it will work just fine with "double-density" 720K floppy disks. I just retrofitted three different XT-class systems (an original IBM PC, a Packard Bell Turbo XT clone, and a Tandy 1000) with 3.5" floppy drives, and all can read and write to 720K floppy disks just fine without needing to change or upgrade the floppy controller. The only thing you may run intro trouble with is formatting 720K disks, but the easiest solution to that is to simply format the disks on another computer.