--If you're not used to dealing with seething masses of humanity, then I'd recommend springing for the plane ticket.
--If you want to practice your Chinese and have stories to regale your grandkids, keep the hard seat. Don't expect to get any sleep and you'll need to watch your stuff.
It's likely that on this train, not everybody who's bagged a sleeper will be going all the way to Xi'an. When they get off, a sleeper berth will be freed up and it is theoretically possible to get this sleeper, with cost prorated for the balance of the journey. To do this, you need to find the on-board conductor and get in his/her good graces, and be willing to take hard or soft sleeper whatever comes up. This will be easier if you speak some Mandarin. There will be others trying the same gambit, so it is really a crapshoot.
Despite kitsura's comments, most Chinese trains are actually reasonably decent.