I'd agree that the two vehicles would be pretty similar offroad. The Liberty has better approach/departure angles, but the Xterra has much better ground clearance. The Xterra is built a bit tougher, with a truck frame and beefier axles. A stock Liberty will only allow about a 30" tire, as opposed 32s on a stock Xterra - which makes the ground clearance advantage for the Xterra even bigger. The Liberty is faster and rides more like a car (although I thought it bobbed around too much on the highway). Cargo capacity is heavily in favor of the Xterra, and I like the cabin of the Xterra better. Like Chuck said, reliability can be a bit of a crap shoot, but your odds are quite a bit better w/ an Xterra.

I'd personally recommend an Xterra (obviously). I went thru the same decision before I bought my X and I'm extremly glad I did - I still don't think I've ever seen a guy driving a liberty, just chicks!