Personally, I think $200 is worth spending for the flexibility. While I could tether with my Epic, it's one more thing to worry about, and I'm guessing that the Xoom running 3G will have better battery life than the Epic acting as a router. And, given that the Xoom will be upgradable to LTE sometime in the future (at a cost, I understand), it makes sense to spend just a little more.
Also, I'll be buying mine at Costco, and if they do their typical $100 discount, then the price will be $699 (and with a 90-day return, to boot). That seems entirely reasonable for what I'll be getting. Overall, I'm cool with the whole thing.