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Google also indexes documents served as application/xhtml+xml. However, many browsers, including IE, do not render pages served as application/xhtml+xml. In fact, google offers a "view as HTML" link for these pages to make it possible for the bulk of users to access these pages.
You can see examples of application/xhtml+xml pages in Google SERPs by searching for "XHTML 1.0 Strict as application/xhtml+xml"
Do people still experience that file size is an issue for google at all? I understand that 100KB plus is an issue (which I would not attempt anyway).
However, will the difference of let us say 25KB vs. 15KB HTML size make a (gradual) difference as well, or does google just stay away from the very big-file-size-offenders?
Anyway, I have several pages that are XHTML 1.0 transitional, XHTML strict 1.0 and XHTML 1.1. All are ranking fine, and there has not been any problem with google.
Back to the original topic: Google doesn't seem to have any problems with XHTML. I have a site written entirely in XHTML 1.1 and it has several pages ranking extremely well on Google for a variety of keywords.
Google doesn't validate your page, so it won't care about the document type (as long as you serve as HTML and not XML, it won't).
I find the issue of file-size to be of absolutely minor importance. Whether or not you quote attribute-values won't make any real difference. You get actual differences when it comes to strict separation of layout and content, using CSS (not that CSS would only be possible with XHTML -- HTML4 works just the same).
Anyway, you have to quote some attribute values even in "normal" HTML, those containing certain special characters, so it's much easier to just quote everything and not always think about whether or not this or that value needs quotation.
But you can use single quotes ' in XHTML, that should save some bytes... the double-quote " has twice as many pixels! Especially if you print the source your paper will weigh less, and you'll save on ink. OK OK...