I'll start by saying that I personally don't like thin provisioned storage. I prefer to avoid a situation where the storage space gets over-comitted. That said, to back up your VMs, copy them to another storage repository (or migrate if you have the option), then you can do whatever you like with the SR that you are going to reformat. As for the size of the VM once it's thin provisioned, it will vary depending on how much data you have on the VM. A fresh install of Windows with no apps will take up much less space than the same installation with 100 apps installed. Just be mindful that if you have many VMs that grow over time, you could inadvertently use up all of your storage space. Another point to consider is virtual disks may become fragmented if you use thin provisioning. That's definitely the case with VMware, and I think the same would apply to XenServer (or any hypervisor). Sorry for the late reply.
Brian Welchel
CTXSupport.com