I would personally recommend the 3-1/2 octave xylophone, but it really depends on what your plans are as a musician. Is this for orchestral, symphonic or pit-work? If size isn't an issue, save up for the 3-1/2 octave instrument.
I'm one of those people that desires flexibility and versatility. I'd rather have more than what I actually need, and never have to worry about shifting octaves (for the most part).
Also, if you don't have a marimba, the 3-1/2 xylophone will allow you to practice a lot of the marimba compositions. Sure, you may not want to perform marimba works on a xylophone, especially since the tuning is an octave higher than a marimba, but if the xylophone is your only mallet instrument, go with bigger ... if you can. I purchased an Deagan c.1908 4-octave xylophone for this very reason ... since I didn't own a marimba.
The 2-1/2 octave xylophones have been a real source of frustration with me over the years. They remind of back when I was in marching band 30+ years ago; back when we had to physically carry the mallet instruments. Using those instruments for anything other than music specifically written or arranged for them typically caused me problems. Even when using the 2-1/2 octave xylophone for teaching younger students... they are great for awhile, but I always seemed to hit a roadblock at some point. Having a young student shifting octaves to overcome the instrument's limitations can be quite confusing.
Truth be told, having to make sacrifices in the music due to instrument limitations is something many brass, woodwind and string instrumentalists deal with as well... so it's not unrealistic for percussionists to experience the same thing (eg. timpani). However, if at all possible, go with the bigger instrument, assuming, of course, that the larger footprint/size of the instrument doesn't conflict with your goals are personal plans for use... and fits your budget.