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In Linux circles, I'd say yes, it's pretty well known. It used to be my choice of DE, but takes a lot of tinkering and is not as feature complete as KDE is (which is a plus for others, I suspect).

It's mainstream in the sense that the Gnome community fragmented so much in recent years (see Mate and Cinnamon "spin offs") that these days Xfce has roughly the same mind share as Gnome -- if the recent poll on Slashdot it any indication. http://slashdot.org/poll/2751/which-desktop-environment-do-y...

No, XFCE development is very slow. Last I checked, I think they still working on GTK 3 support.

LXDE/Lubuntu is probably closer to that "16%." I can get <200M initial RAM usage pretty easily with LXDE. XFCE is really not that lightweight. They are both pretty lacking compared to current versions of GNOME/KDE.

Debian is currently considering shifting it's default desktop to XFCE, as guh-nome has taken some ridiculous turns for the worse. It'd be a good step for XFCE, as it'd start getting a lot more attention to the areas where the integration is lacking.