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I think the first step is to make the XOOPS core 100% php5 compatible. If thats already the case, excellent. Next step is to work on getting the modules php5 compatible, and a conversion team wouldn't be a bad idea since many modules are no longer maintained.
After that, if it is the case that php5 is widely used and necessary in order for XOOPS to stay innovative, then stop supporting php4. However, I don't see that happening in the short term. I've yet to see a major CMS drop php4 support, because doing so would seriously threaten its user base. Thats my opinion, I'm sure some would argue differently.
I would compare XOOPS dropping php4 support to XOOPS dropping mysql3 or mysql4 support. While dropping support for mysql3 is probably ok, dropping support for mysql4 would be a mistake.
However, I do think XOOPS should start bumping up its requirements (and getting rid of legacy code), such as dropping mysql3 support and bumping up minimum php version to 4.3 and higher.
