Do the XM-L mod! I'm thinking about it for my Q5 version. There are people out there modding 14500 lights to xm-L to good effect, and a 14500 is comparable in capacity to a 16340 (okay, 14500 is a little bigger). The LED pulls more current and can strain the battery, but with the driver included on yours, you'd have to see first. Simply meter it and decide from there. It's not like you have a high-current driver on there.
I am an owner of the 'old' Q5 version. I do like the light (aside from the strobe and no medium--at least no SOS). My favorite feature is that the pill screws into the body, so I can screw off the head/reflector and use it as a 'candle', but the Q5 is a little weak for that. You can also adjust the reflector by how far it's screwed into the body.
However, last night I compared the XR-E Q5's tint to my XM-L drop-ins, and it the Q5 was blueish even compared to my coolest/worst-tinted XM-L (the latest one, FWIW--my 3 XM-L's have trended cooler the later I bought them).
IIRC, my Q5 C7 only pulls .75 amps at high, which is almost identical to your XP-G. I bought a 14mm XP-G star and never put it on there. Now I'm thinking of leapfrogging and going straight to an XM-L, as they're now available in 14mm stars. Just the fact they're available in 14mm stars implies intended uses on small lights such as 16340 and 14500.
My wonderful genuine Ultrafire XM-L 3-mode drop-ins from Manafont draw .75 amps on medium. To my eyes, the drop-in on medium is comparable to my cheapo overdriven XP-G drop-in on high (almost 2 amps; 1.5 is Cree's updated rated max). Hard to say which is brighter, and that's not taking into account the PWM of course. Doesn't cree say that XM-L's produce 300-some lumens at .75 amps? Just looked it up again: almost 390 lumens @ 1 amp. Which is around what an XP-G does on max; if so, I've observed correctly. So I can say XM-L's do wonderfully at .75 amps. And an XM-L will probably pull more than .75, so there'd probably be no desire to change the driver. There are still a lot of myths and fears about XM-L. However people who have taken the "risk" have been rewarded. You just may not be able to do "high" for a long time on the C7--BUT, you could NEVER do high on the C7 for a long time! The light is not for that. And yes, it would beg for 3 real modes then.
Nailbender or someone at least used to sell a freaking SST-90 version of the C7! With an XM-L you could get something approaching that brightness, but more useful, and far cheaper.
The biggest question is, once installed, check how much current it draws, decide what's right for the cell (you can always switch to LMR/LiMn battery if needed). If it did drive it higher than you'd prefer (I doubt it, but possible), you could experiment with using a LiFePO4 16340 which produces lower voltage. They will charge up to 3.8 volts if you abuse them, but even at the proper 3.6V it should drive the later Cree's. They are a very safe chemistry. LiCo (standard li-ion) is still pretty safe in the 16340 size anyway (the smaller, the safer), at least for high non-short-circuit drains. You may shorten the life of the battery, but your confidence in it going "boom"... uh, you're probably more at risk of a dead fish being dropped on your head by a seagull in the Sahara desert, in particular if you're using Protected cells. Ok, I exaggerate. But if a 16340 cell is real-world 500mAH capacity, 3C would be 1.5amps, and 3C is still not criminal with LiCo. Above 1.5 amps I'd be a little worried, but just use common sense, or a different chemistry.
Here is an example of what going from XR-E to XP-G can do (this is the thread which got me to order the 14mm XP-G star). Just imagine what going to XM-L would be.
It's disheartening to see the DX reviews of declining quality. And the price is 60% what I originally paid. Below is an example of what going from XR-E to XP-G can do. This is what got me to order the XP-G 14mm star.
http://www.dealextreme.com/forums/Default.dx/sku.26497~threadid.489856
P.S. Isn't it nice that Ultrafire has been THERMALLY POTTING their pills lately? (see the photos in the OP's link.) For all the general whining about 'bad heatsinking' I see, I've personally seen Zero comments by anyone anywhere about Ultrafire stepping up and doing this. All of my Manafont Ultrafire XM-L's are potted in the same way (mechanically, not by hand). And the reflectors seat better, even on other drop-ins. UF has really been going on an increasing quality streak lately. I'm impressed, anyway. I agree that $20 is probably too much to ask for this light, especially with only low-high-strobe. But then again I think I paid $17 for the Q5 version. I personally get more use out of my Trustfire Z1 (which also came thermally potted, although awkwardly by hand; better than nothing because it's thermally challenged). However, now that I have XM-L's, everything is disappointing. Last night I also did a side-by-side comparison of my XM-L drop-in on medium (.75 amps) next to the Z1 on high (a little over 1 amp IIRC?)... xml beat it with a stick, and with better tint too. I see little point with any other LED after all my experience.