"Yes, I've upgraded my '06 Mac Pro with two Xeon 5365s (bought from EBay for $400 each). Works great. Attached are screenshots of the About This Mac (running 10.6.1) and System Profiler screens.
(I asked Rob for comments on performance improvements (vs the original dual-core Xeons) and any other observations (or tips/notes) he'd care to share.)
Before the upgrade, my '06 Mac Pro at home was the 3GHz (dual Xeon 5160s) model.  The performance gain from upgrading to the 5365s really occurs with apps that can take advantage of the extra cores... in my case:

compiling software (I'm a programmer and work with software consisting of millions of lines of code) where parallel makes can fully load all the cores

transcoding video with software such as Handbrake

When idle, the CPU temperatures of the 5365s are about the same as the 5160s were; however, when all the cores are fully loaded, the 5365s do seem to run a bit hotter than the 5160s... perhaps 5 or more degrees (F). The Mac Pro remains relatively quiet. [Using smcFanControl is always an option to bump up the RPMs on the system fans if the CPUs are going to be run maxed out for long periods of time but so far I haven't seen much of any reason to worry about heat.] I've had the Mac Pro max'ed out for days at a time.

Overall, upgrading to the 5365 Xeons was easy. The hardest part was having to deal with a stripped screw (apparently, a common problem) and removing the internal fan assembly (which was a really tight fit).

As a comparison, my '09 Mac Pro at work has two 2.26 GHZ quad-core "Nehalem" processors and is noticeably (50% or more) faster than the 5365s due to the combination of twice the cores (16 virtual cores instead of 8), faster memory, faster bus, etc. However, to get a fully loaded (max CPU speeds, max ram, etc.) '09 Mac Pro would cost $7K or more. Instead, for $800, the '06 Mac Pro (with RAID, 24 Gigs of RAM, a modded ATI Radeon HD 4870, etc) gets a worthy speed boost for a fraction of the cost... meaning that I can wait for another rev or two of the desktop line before I feel the need of doing a costly upgrade to a brand new box.

I would give the upgrade a solid 9 out of 10. [Minus one point due to having spent a couple of hours basically tearing the Mac Pro apart to get to the CPUs; not as easy as upgrading RAM or hard drives.]
Regards, Robert"

BTW: I had a 2006 Mac Pro owner write recently about buying some Xeon 54xx series (aka "HarperTown") Quad-Core CPUs - but as mentioned here in the past, the HarperTown/54xx series CPUs are not compatible with the early (2006/2007) Mac Pros. The 2008 Mac Pros used HarperTown CPUs but they have a different motherboard (w/PCIe 2.0 slots, 800MHz FBdimms vs 667Mhz in the 2006/2007 Mac Pros.)

"re: 64-bit Builds of HandBrake
The 64-bit build has half the output formats of the 32-bit version - no AVI and no OGM. I suspect that those libraries or converters or whatever do not yet have 64-bit versions.
(See below for an explanation on why and their future roadmap/focus. Future versions (even 32bit) won't support them either.)
Sadly, I need AVI for Windows & FCE compatibility.
-Jim"

As I mentioned yesterday, I'm using the std 32bit version (+ VLC 32bit) and very happy with performance and quality. (Primarily used for MPEG-4/H.264 conversions.)
Update: A reply to the above this afternoon:

"....you should refer that Handbrake commenter (above) who needs AVI and OGM to the release notes for the latest SVN builds. (At the bottom - AVI and OGM (and XviD) support are gone as of 0.9.4 final release)
http://forum.handbrake.fr/viewtopic.php?f=5&t=12464
So maybe he'll be using 0.9.3 for awhile...
Best, Garth"

That forum thread ("HandBrake SVN2845 Snapshot", Sept. 28th) has an "An afterword on project focus":

"As we've had on our roadmap (trac.handbrake.fr/roadmap) for quite awhile now, one of our goals for version 0.9.4 is to refocus on HandBrake's key strengths and to remove dead weight. As part of this process, several presets, containers, and a codec have been removed from HandBrake..."

See that page for comments on why they're dropping AVI, OGG/OGM and XviD - as well as Video game presets (PSP, PS3, Xbox 360).

Thankfully he later sent a crash log and I saw that PCtool's iAntivirus and Virtualbox 3.0.6's kext were loaded. I asked if VirtualBox was running (wondering if it could be using/not releasing the expresscard) and he said no. The other suspect naturally was iAntivirus. (And regardless, I wasn't thrilled after doing a google search for "iAntivirus + kernel panic", plus a check of the forums regarding Snow Leopard compatibility.)
Personally I'd not have installed it and asked he write back after tests without it. Yesterday he replied a clean install (without it) solved the problem - no more KP's. I can't say that iAntivirus was the source of the problem (I'm not going to install it to prove that), but rule 1 on troubleshooting is to 'minimize the equation' so to speak.

• iPhone, iPod touch, iPod classic 160GB (Late 2009), iPod nano (5th gen): Understanding Genius Mixes
  
  
• iPhone 3G and iPhone 3GS: Troubleshooting MMS
  
  
• Deleted but still listed media content on iPod after importing
  
  
• Some special characters will not display in playlist title, song name, or album name when syncing to some iPod models
  
  
• OS X v10.6: Using MS-DOS (FAT32)-formatted disks for home directories
  
  
• About SuperDrive Firmware Update 3.0 (update released Aug 31, 2009)
  
  
• Xsan 2.x: Available free space incorrect after bandwidth expansion
  
  
• iPhone and iPod touch: Understanding subscription Wi-Fi networks
  
  
• iTunes Store: How to use Wish List
  
  
• iTunes 9: Font Text is incoherent or appears in a different language
  
  
• Viewing videos in iPhoto '08 on OS X v10.6 Snow Leopard may need QuickTime 7
  
  
• How to back up your iPhone and iPod touch
  
  
• OS X Server: Setting up Managed Preferences for Print Server queues
  
  
• OS X Server v10.6: Configuring the Mail service so Mailman can support virtual domains
  
  
• OS X Server v10.5, 10.6: Preventing DDNS registration for multiple interfaces