This week's book giveaway is in the OCPJP forum. We're giving away four copies of OCA/OCP Java SE 7 Programmer I & II Study Guide and have Kathy Sierra & Bert Bates on-line! See this thread for details.
The second method is just more self-documenting, and certainly preferred if other people will need to see your code, or if there's a chance you may forget what "Xms" means someday. It's also slightly more stable, in case the command line flags ever change (unlikely). Lastly, your IDE may be able to validate the XML attribute name and values, where as the first version would most likely be ignored by the IDE and therefore up to you to sanity check the args.