I have an S model that came stock with 31" tires (265/70/16). At the time I upgraded, my Xterra was also my daily driver and I didn't go to a full 33", so I opted for a 32" instead (265/75/65). In the end, I'm glad I did it. I've never had an issue that a 33" tire would have made a difference in, and I easily saved $100 or more on the full set. Plus I was able to get a 32" spare for cheap, since it's the OEM size for the Pro-4X and Offroad models of Xterra (just bought one from another member on this forum that had upgraded to 33s).
Since that time, I've purchased a commuter car and no longer commute in my Xterra. That decision was made because I was bitten badly by the "mod bug," and decided to start going full retard with mods. I quickly saw my gas mileage go from 20-ish to 18-ish and now down into the 15-16ish range. So, for my next set of tires, I'll be upgrading to 33s, and that's mostly for asthetic reasons than it is functionality. As others have said, you'll get an extra 1/2" of lift out of a 33" vs a 32", but the extra cost/weight/decreased MPGs wasn't worth it for me. I actually noticed a difference even going from a 31 to a 32, but I'm also a lead foot and drive 80 mph on my commute, which has a lot to do with that.
So my official opinion is that, while you may eventually wish you had 33s, you won't regret getting a 32" as long as you get a high quality tire with an aggressive tread pattern. I have the Duratracs as well, and I LOVE them. You'll hear a lot of people say they're not good for the desert because they're a softer compound and get chewed up by rocks. Those same naysayers will tell you to get the KO2s for the same reason. While it's true - BFG does design those tires specifically for the types of desert running that most of this group does - it's also true that the harder compound means less grip on slick surfaces. That includes concrete, mud, and most of all, snow. So if you spend any time up in the mountains during the winter, you may be better off with the duratracs. Also, I've chewed my duratracs up pretty good on many rocky desert trips, and they're holding up very nicely with no issues a all. One member on this forum, Motorpig77, recently purchased new KO2s to repace his Duratracs, and he has said he notices a difference in traction when cornering and on slick surfaces. I believe he's planning to convert back to Duratracs.
But, whatever you end up with, I'm sure you'll be happy, as it'll be a huge improvement over OEM tires. One last note - I would highly recommend a load range E tire, regardless of what brand you end up going with. They're stiffer and won't ride quite as nice, but it'll make a big difference when you air them down in the desert, especially in regards to protecting your sidewalls from sharp rocks.
