HK supposedly still owns a part of the XM8 design, but it seems General Dynamics has picked up most of the work. I think it's an ugly piece of shit, but the XM8 is not dead. General Dynamics is supposedly making some changes, and when a new rifle solicitation comes around, the XM8 will probably be there. The chances of it being recognizable from it's past form are slim.
The G36 does have a heat problem. The barrel is attached by trunions which happen to not like heat. Both select fire and suppressed weapons have troubles, but unsuppressed semi autos probably only need to worry about the common receiver crackings.
The G36 is only discontinued in America. Meaning no more G36's will be imported. HK will still have to provide replacement parts for ten years and the G36 will continue being produced in Germany.
The XM8 did not perform well. A demo was held where many of the XM8's failed to function properly, and this could have been the last straw for the whole program. Funding was cut, but it's still debated if it was from the physical failure of the program, or the wrongful absence of a fair solicitation.