Well far be it for me to steer folks away from Xara, but a had a bit of a browse for other software created to achieve the much asked about 'cartoon' effect and came across 'IntoCartoon'.
There's a free trials of both versions available here:
http://www.intocartoon.com/download.html
The results are quite impressive, though big images are a big of a handfull and slow to process. There's much I haven't explorered yet but here is a quickie I created with IntoCartoon from an image freely available from http://www.seriouswheels.com
I could see this being the starting point for a fully vectorised scalable illustration project in Xara?
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