Unlike most IRC clients, I noticed that xchat by default does not have triangle brackets <> around nicknames. While aesthetically it looks fine as there is a vertical bar seperating nicknames from text, it's not as visually easy to separate the nickname from the text when you cut and paste. To get around this:
Settings -> Advanced -> Text Events...
You should have a new popup. Click on "Channel Messages" and you will see:
at the bottom you will see what each variable means. In this case, 1 = Nickname. So we will append to this line our triangle brackets:
Now hit [enter]. You should see an example come up on the screen. Once you've seen the example you can now click "OK". If you click OK before hitting enter, your changes will not be saved. 'Channel Msg Hilight', 'Your Message' and 'Private Message to Dialog' should also be changed accordingly.