Best CPUs for Sonar - Xeons or i7's?

In general, i7s because you can get them at higher clock speeds. Xeons are nothing special overall. Within a given generation they are the same core CPU as the Core i series. Same instruction set, same IPC, etc. They do have additional features, but nothing you'd generally care about on a DAW:
 
--Multi-CPU support. Xeons can support up to 8 CPUs on a single board, depending on model. You need the right board though, and that is expensive. Also multi-CPU setups increase latency.
--More cores. Standard desktops cap out at 4 cores, which is plenty for pretty much everything. The high end desktop processors go up to 8 cores and soon 10. Xeons go up to 18. While more cores sounds more better, it costs a ton and also the thermal limits are the same, so they run at slower speeds.
--More memory. Standard desktop processors support 4 memory sticks, high end desktops support 8. That gives a max RAM of 64GB and 128GB respectively. Xeons can support a lot more RAM sticks, and also can use buffered ECC RAM which can be larger. So a Xeon can support up to 1.5TB/processor.
 
So they only matter for really high end applications. For a DAW, a regular desktop processor or high end desktop processor is the way to go. Also desktop CPUs can be overclocked, allowing them to exceed their normal thermal limits and go faster, Xeons can't.
 
Only way I'd say get a Xeon system is if you buy an actual workstation system from someone like Dell with a high end support contract. That does get you generally very reliable hardware with good service. However it is expensive and just not worth it unless you have a specific reason.

Thanks guys for the response. Much appreciated.

Ya perhaps I should have clarified "Intel's programmed limits." All their CPUs have a built in power and thermal limit, that is below what they can actually handle, often significantly so. Xeons will not exceed it, they are locked to the set limits.