Dave,
The answers to your questions are all to be found in the manual, if it's not clear in the factory one (which is aimed at mechanics) then ideally get yourself one from say Clymer or Haynes (assuming they do/did one for the XT?). It would take someone an age to tell you how to strip and rebuild the top end of the engine in the detail you need if you've not done anything like this before wheras it'll all be in a anual including photo's etc.
If you are handy and have a good quality toolkit then doing the job yourself can be very rewarding but there are many things that you could do wrong unless you take care and follow the intructions carefully.
Are you sure the head/cylinder will come off with the engine in the frame? If the manual says it will fair enough, I just can't remember!
Finally, as modern bikes go, the XT is a simple one and relatively easy to work on and learn from, so good luck. Take it slow, don't force anything and when you put it back together make sure everything is surgically clean.
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