Yeah, I thought it was cute how she acted around him too. I don't know if they would have hooked up if she stayed though, just given her character I mean. But if she hadn't died and stayed on the show longer (for a few season as a regular), it would have been interesting to see that side of her develop. Just her working without so many rules and having to work around males so much, I think that Xander especially would have been a big influence to that part of her character, as he seemed to at least want to befriend her in season two (I honestly don't remember the episode well enough at the moment to know whether he mentioned romantic interest or not, but I think so) and out of everyone on the show (male-wise) I think he would have been the biggest humanizing force for her. Again, I can't see them dating, but it would have been neat if she stuck around, her character had a lot of potential for growth that way.
Oh, and I think it would be "Xendra", it seems that it's usually you use the one easiest to recognize and least likely to be confused with another ship. Because we saw more of Xander on the show, using his initial first followed by the rest of Kendra's name, seems a lot more likely and easier to comprehend.