Darvin: This isn't as big a deal as it sounds. There are plenty of great spells in other schools that can completely shut down the enemy. The web spell and stinking cloud spell, for instance, make enemies completely helpless to your archers and their long duration means that they can actually affect far more targets than a single fireball can.
Both Web and Stinking Cloud are of the Evocation school, I believe, so in fact Xan cannot use these.
I agree that Xan is not very useful, Dynaheir and Edwin are both a lot better. Mages in BG1 are rather limited, even more so at lower levels. Take along Xan if you want a more "exotic" party member, or if you want some self-imposed challenge. If you absolutely want to take him along for the ride but you don't want to be handicapped, using a mod or Gate/Shadow Keeper to give him a different specialisation or to make him a sorcerer is also an option.
I remember once I had a party where him (unmodded) and Garrick were my only magic users, just to make the game a bit more challenging...fun times were had.