I don't know why you would think Xeons don't OC well - I used an e3110 (Xeon version of e8400) that overclocked almost exactly the same as my e8400, slightly lower volts & lower temps at 3.6GHz.
Never pushed it so I don't know if it was any better or not but I believe the only difference between the two lines is the etching on the heat shield and the code telling your motherboard bios what chip is installed.
Concerning that Xeon E5502 -
linkage.
Highlights: D0, 80W TDP, 4MB L3, dual core
So it will use less power/generate less heat, should overclock well and has half the cores/cache of the Nehalem quads.
Supports virtualization but does not list Hyperthreading under the features.