Hi Docbar,
I'm offering this post not because I have anywhere near the experience that these other folks do but rather because I was in your shoes about 2 yrs ago: 260 or 346. I ended up getting the 260.....only becuase there were no 346's around for me to look at. Most of the Husky dealers I spoke with didn't even know what the 346XP was. Anyway, I'm not sure which one I would have purchased had I been able to hold both (no dealers would allow a test run). Knowing what I know now though, I would have had a dealer just order a 346 for me. Here's why. I was dissapointed in the 260's power right off the bat. I was expecting more. Inspired here to install a fully adj carb & mod the muffler, I did just that. Luckily, a member here sold me a nice rebuilt carb for about $25 (new would have costs ~$70). The saw runs considerably better now. But, that's work & money I had to put in it.
Another couple points I might make is that the 346, I am told, runs smoother & vibrates a touch less. I don't know how good the filter is on the 346 but IMHO, the 260's is poor. Supposedly there's another & better filter that Stihl makes but that's more money....around ~$25 I believe. So, the saw cost me $420 then I turned around & put the $25 carb on. It's now a $445 saw. Should the other filter pan out, that brings the total price to around $475. The 346 on the other hand, I believe, can be had for a full $100 less than that, perhaps more. That's not bad considering fewer vibes may reach your joints.
And one last point. If I'm not mistaken, the Husky has a better warranty too. Someone here may know better than I but that seems to be what I remember after buying my 260.
I should also note that the newer 260's I have looked at have fully adj carbs so maybe that aspect shouldn't be factored into the equation. However, it will still have the choked up muffler which from my experience, really holds that saws performance back. If you can mod yourself, then no worries. Otherwise, just something else to consider. As for the stock 346 muffler, I don't know. I just haven't seen reference here on AS that it holds the 346 back like the one on the 260 does.
Currently, for myself, if I had money burning a hole in my pocket, I'd just order a 346, try it out then sell which ever I liked least, 260 or 346.
Good luck.