Speaking strictly about character animation, Houdini is a much better tool than XSI, both for rigging and animating. What you might gain from using XSI is a lower price for the entry level package, hair & cloth (you can do those in DOPs which are only available in Houdini Master - 17K USD), and maybe a larger tutorial base.
In Houdini you have an extremely powerful and flexible bones system, skinning controls, CHOPs which are the Animation Mixer on steroids (but with a slower workflow for simple tasks), very good modelling and best of all, OTL and takes.
With OTLs you can package your character in an operator and just begin animating. You can modify the setup while you do your animation and everything updates automatically.
With takes you can save multiple versions of the scene in the same file, compare them, mix them. Ideal for character work.
And yes, you can do squash and stretch setups.
As Simon suggested, try the rabbit and also the skeleton
http://www.sidefx.com/index.php?option=com_wrapper&Itemid=145 [
sidefx.com] OTLs for a quick view on what's possible.
Also, browse the character tutorials in the new help system which is very nice in Houdini 8
Dragos