I do not agree with Pawel that Prince2 assumes big design up front. Prince2 is all about project governance, it doesn't tell you anything about which development method to use. But he is right that the method can be tailored to your specific needs. None of the (I admit many) templates have to be used, and lightweight (agile) artifacts can be used instead.
In fact, Prince2 works quite well with Scrum, where Scrum is used for the "Managing product delivery" process group. Likewise, as you can tailor Prince2's technical stages to allow for the FDD processes, I am sure you could do the same with XP (I've never practised XP myself, so I am not an expert ;-) ).
So the issue, in my view is not Prince2 but the combination of FDD and XP. These are both development methodologies, and combining them strictly is going to give some friction. That doesn't mean you could use one, and add some aproaches of the other. Pair programming, automated testing, refactoring ... These are not exclusive to XP.