How much SSD is needed in a Macbook for Xcode and App development?

Depends on how much you are going to be programming. If you are creating numerous apps that are 500 megabytes or more, along with a full music, video, and photo library, I would go with a 256 to be safe. But, if you can still utilize your 500 gigabyte hard drive, you would have a much better solution with the 128 gigabyte to save money. 500 gigabytes with the 128 gigabytes (628 gigabytes) should be plenty.