Thanks for the trip report.
A couple of points:
I'm not sure what you mean when you say there weren't many restaurants in the old city area in which you'd be comfortable eating. There are, basically, two ways you can travel in a foreign land: you can experience the culture, which includes eating in locals restaurants, or you can see the sites as a tourist, which will mean spending your time in restaurants like the "buffet" you mentioned. There are many wonderful restaurants in the area in which you were in, but they are locals places not designed for western tourists. One of our favorites was a state-run Muslim restaurant, the name of which I don't recall at the moment, that served local cuisine that was simply out of this world. If you confine yourself to "western looking" restaurants, your going to get low-quality western-style Chinese and western food.
I agree about the staff at the Sheraton Xi'an -- they are excellent.
I also don't know what you meant about third world taxi drivers. For starters, it's not quite accurate to describe China as third-world. Yes, it is a developing nation but, particularly in the cities, it is far closer to first world. I don't know how much of Xi'an you got to see, but it has quite a good infrastructure and is hardly what I think of when I think "third world." As far as the taxi drivers go, I don't know what you were expecting but, again, in China's cities, taxi drivers know how to drive.
The Big Goose Pagoda is scenic but, in my opinion, the Little Goose Pagoda is far more interesting. However, that's a matter of personal opinion, I suppose.
Regarding Chinese toilets, yes, they can be challenging. As far as they're being "disgusting," I don't doubt that's your subjective reaction given a western background, but cultural sensibilities differ in this area as in so many others -- think, for a moment, of the outhouses of the 19th century, or the shared toilets of an early 20th century tenement.
Regarding the "state-run" reproduction factory, I'm not familiar with it, but I'd also be surprised if it was actually state-run. These are tourist traps the sell over-priced souvenirs. I have a low opinion of a tour guide that would consider this a "necessary stop" on a short visit such as yours. The guides get kick-backs for bringing tourists to these "factories" (and this isn't unique to China -- you'll find them all over the world). The same is true of the buffet. Based on your description, this is strictly for western tourists. The whole concept of a buffet is antithetical to Chinese cooking philosophy, in which all ingredients must be fresh, prepared fresh and served and consumed immediately.
I'm glad you enjoyed your visit to Xi'an, but I'd recommend that anyone visiting the area (1) take a little more time to visit as there are many fascinating things to see, (2) avoid like plague anything designed specifically for western tourists, (3) carry toilet paper with you (true any time you get out of the major cities in China), (4) avoid large "workshops" as they are the equivalent of Times Square souvenir stores (when we were in Xi'an we found a little shop that made traditional shadow puppets out of leather -- these were reasonably priced, beautiful, native to the region and made great souvenirs), and (5) don't be afraid of locals restaurants, particularly in an area like Xi'an which has some unique and very tasty local cuisine.