He wants to spend the big bucks to go with a 35mm print just to go to festivals? Festivals are quickly going to HDCAM and other media. The true cost of the transfer and a professional person's time is around 40 to 50 thousand dollars. In the next year or two, BluRay will be the way to go. Write that down.
Why the switch to XD cam HD. Why not stay in 24P HD Cam the whole time. Is this a budget issue? Usually you get a better deal on one camera for several weeks at once. My understanding of XCCamHD is limited but I believe it is even more compressed than HD CAm. We have shot several projects where the interiors were done in HDCam and exteriors in Film. The results telecined together very nicely. Perhaps if the B roll isn't that extensive you could shoot it in film at a low ration using a cheaper mos camera which you could have over a longer time for less money to offset filmstock/transfer costs. In a sitdown show intending to go to 35mm or big screen it may be advantageous to look at some of the new direct to disk HD systems, as you will be in protected enviroments.