I have two friends who have these bikes.
The main problem was the head design (or lack of it) The heads used to leak as the gasket design was poor and then usually crack!! Both have had carburretor problems which have been partially fixed by new kits and O-RINGS
They are a very nice bike to ride as they handle very well and the engine is very sweet when behaving.
They do have a terrible reputation though, but the later XS500 seems to be a better engine all round