Where do you intend to play the videos? If you are playing from a computer, then H264 is fine. There are many media players released in the last couple of years that can also handle H264, in the form of .mp4 or .mkv files, so if you have one of those, I would use this codec, though I personally would use other tools than Vdub.
Xvid avi files work well for dvd players that have divx/xvid support. The vast majority of those dvd players do not play H264.
So your end use is the primary consideration. Good video can be produced using either codec. H264 is what I would use for high definition video, or for saving space and retaining the best quality.
I don’t upload to Youtube, so someone else with experience there may want to chip in. As far as I am aware, Youtube still recommends divx/xvid for their standard def uploads. Don’t know what they want for HD.