Is RESET* on the XMEGA disabled when using the PDI interface?
You can still use it as /RESET.  See this application note from Equinox for some details, or Atmel's own application note describing the PDI interface, if you'd prefer to get it straight from the source.

See part 3.2 in the Atmel doc for more specifics on how it works.  In order to enter PDI mode, the programmer does a little dance: first it holds the PDI_DATA line high for a little while, which disables the normal reset functionality.  Then, 16 edges are sent on PDI_CLK (RESET).  If there aren't 16 edges, or if the timing isn't right, then it's treated as a normal reset.  This is how the microcontroller differentiates between trying to enter programming mode and a normal reset.

It's common to put some filter circuitry on /RESET, or even to have a watchdog chip controlling it instead.  That would cause problems with PDI -- as they describe, you need to have /RESET be more or less disconnected from anything else while programming for the programming to work.  If you just have a button and maybe some small capacitance on /RESET, you shouldn't have to worry about it.  But if you need more circuitry connected there, you may want a jumper or switch that you can use to temporarily disconnect things for programming.