WPA2 consumes more cpu (on both router and your pc/xbox adapter) because of more complex encryption, and regular re-setup of security. It is a trade-off between security and performance.
Do not fall into the trap of the WPA2/WPA Auto setting, choose either WPA2 or WPA as the auto setting mostly will go for WPA, not WPA2.
If signal level (default max - 100%) is not good enough, try to limit amount of walls and angle trough walls. You can probably also buy/build antenna-extenders to boost output. This antenna-thing is mostly on Wireless-G, but they can also be found for Wireless-N.
Encryption-level makes a difference in performance, but signal-levels are much more important. How far is the xbox-adapter from the router, and can you arrange line-of-sight between XBOX Wireless-N adapter and Router?