Welcome to the forums.

You have asked questions which has been asked many times over

Can Xare Xtreme 5 totally sustitute Photoshop
The simple answer is yes sort of, depending..
Xara Xtreme is not a raster (bitmap) editor or pixel pushing painting application.
It's more like CorelDRAW and Illustrator rather than Photoshop and the like.
It's primarily a vector based application which has grown in recent versions to include a lot more bitmap and web related features and function for most needs.

While Xtreme does support PSD import and does have a Layers and an Object gallery, it is not the same as PS's or any other bitmap editors Layering system and works quite differently to what you would expect.

Xtreme can import and work (non-destructively) with bitmaps and photos in 'vector space' and it can export vector artwork as bitmaps. It can use most .8bf type plugins, create flash and animated gif files, all your web graphics and entire WYSIWYG websites from start the finish.

My advise is to download the 30 day trial version and have a play. This is not crippled in anyway, it's the full version you would buy minus the additional clipart and fonts that you would get on the CD after purchase.

Try to forget everything you know about Photoshop and approach Xtreme with an open mind.
You'll find plenty of help right here at Talkgraphics, lot's of tutorials here and more at the XarXone.

Look around, read the FAQs, use the site search at the top right of each page and enjoy.