The G-36/XM8 had a strong argument in its favor when the OICW was still on the table, since HK designed the 5.56mm portion of the OICW and it is, essentially, a 10" barrel G-36 with no stock.
When OICW got pushed back to some unspecified point in the future because it could not make weight, any argument in favor of the G-36/XM8 got a bit less convincing. H&K tried hard to sell the idea, anyways, but the G-36 simply does not bring a whole lot to the table that the M16/M4 family does not already provide (as well as some really dumb ideas, like trying to push a fixed-barrel XM8 HBAR as a SAW replacement . . .). The pluses did not justify the minuses of scrapping perfectly good weapons and spending boatloads of money on new ones. And that's not even considering the other minuses of the proposed XM8 that the staff morons pushing the idea never looked at (why does it seem like people who haven't been to the field in twenty years are always so enamored of built in carrying handles on rifles? etc.).
Having had a chance to do some flat range work with a G-36, I'd say it's a good weapon, but I did not feel like it did anything that my issue M4A1 won't do. I did not care for the fixed length of pull stock or the silly carrying handle/optics set up, but otherwise thought it was pretty reasonable. Never got my hands on an XM8 back when it was a contender, so don't know how it stacked up.