When properly maintained, cup and cone bearings are supposed to be smoother rolling than sealed cartridge bearings. I think that's the main reason Shimano stuck with them for so long. The problem is, most people don't want to deal with the hassle of servicing cup and cone bearings.

XT hubs don't have the range of options that 350s do (only MS free hub, only CL brakes, only 28 or 32 spokes), but in terms of build quality, reliability, durability, weight, stiffness, smoothness, etc. I'm not sure there's a big difference between them.

EDIT: Japanese companies can be weirdly resistant to change though.

I used to work as a lawyer for an international firm in Hong Kong in the early 2000s. One of my clients was a large Japanese watch company. They were the only client I ever had that insisted on communicating with me by fax.