1.)Is XNA really the best graphics engine out there?
It's not really a graphics engine. As Shasta says, it's just a wrapper for DirectX. Which itself is just a wrapper for your graphics driver. Which does a bit of processing before dumping things to the graphics card. So it's a pretty low level interface. Usually what people mean when they say "engine" would apply to something built on top of XNA.
As for best... Assuming .NET, it's in the same category as Tao (OpenGL) and managed DirectX. They're not better or worse, they're just different. The main advantage/disadvantage of XNA is that it's driven by Microsoft. The others are open source efforts.
3.)Will DB3 use XNA?
DB3 uses a generic graphics library. This library has an XNA module, but it also has a GDI module. Meaning that you
can run the game using XNA (and it'll probably be prettier and faster) or you can use the lower level GDI that should be more compatible across cards/older computers. Or you can run it command line and there won't be any graphics at all (though I haven't thought this part through very well just yet).
Probably there'll be a Darwinbots "client" and a Darwinbots "server". The server runs the core simulation as a command line program. The "client" connects to the server to display graphics and do UI. The advantage being that the client doesn't have to be on the same machine as the server. I'll probably also make a single app for those that don't want to mess with the server/client thing.