One important thing is that you always need to install the latest d2x-xl.hog file coming with the windows distro of D2X-XL.
In d2x-xl.ini set -hires_textures 1, -cache_textures 1, -hires_models 1, -model_quality 2.
Install all hires textures (put them in subfolder "textures" of your D2X-XL installation) and models (put them in subfolder "models"). Find them in
http://www.descent2.de/downloads.html. Be aware that the textures are stored in quite a few separate rar files, each containing all textures with a certain theme (doors, rock, metal, etc).
Turn colored lighting on. You may want to try OpenGL lighting, but turn it off for polymodels because you need a beast of a machine to run that (config -> render options -> lighting).
Set render quality to very high and texture quality to high (config -> render options). When using hires textures with another than hightest texture quality, D2X-XL will resize them the first time it uses them, so level load time may be increased. This is a however one time effect.
Turn on coronas, explosion blasts, energy trails, tracers and thruster flames (config -> render options -> effects).
Turn on smoke (config -> render -> smoke).
Turn on 3D powerups (config -> render -> powerups).