Welcome to FreeSWITCH and VoIP! I hope you don't get scared away too easily. :)
First question: is your xlite on the same computer as your FreeSWITCH install? Usually you don't want your softphone and FS to be on the same computer, however if you are simply doing some testing and trying to learn then it should be okay.
Here is where the fun begins. A SIP 408 means that the request timed out, so the xlite is sending messages to the FS server and is not getting anything back. Be sure that you use the correct IP address. The best thing to do would be to start fs_cli.exe (which connects you to the FS command line) and then type this command:
eval ${domain}
It should return an IP address - use that IP address in the xlite account configuration.
Let us know how it goes!