Upgrading mountain bike crankset because worn teeth & chain slippage
It's quite unlikely you can't get enough top speed on that bike with those gears.
A 42/12 ratio with 29x2.2&quot; tyres results in a 28mph top speed at 90rpm (most people could pedal faster). Since it is a mountain bike, you probably won't be going that fast except maybe down a steep hill, in which case not pedalling usually works out faster. On a lightweight road bike in a peloton this gearing might be insufficient. But for solo riding on an upright bike realistically you won't be pedalling very fast for very long because the air resistance will slow you down too much.
Your current chainset is non-replacable chainrings, so it's a fairly wasteful piece of design in that you must throw it away when you wear out a chainring. However since 7 or 8-speed (anything more requires a narrower chain and a total replacement of your entire drivetrain) is old, Shimano don't make a quality 8-speed chainset any more. So you might as well just replace with the same chainset you have now. It's heavy and disposable, but it works fine.
The other problem with your bike is the fork, which is a low quality one. Probably SR Suntour XCE or XCT. Upgrading this would definitely be more expensive than finding a used bike with slightly higher quality parts fitted (i.e. SR Suntour XCR coil at a minimum, but probably better an air fork).
At this point you can also consider whether you are not better off with no suspension, as this will make you faster and lighter work, typically.
Also there isn't anything specific to 'XT' as opposed to lower chainsets. Sometimes it means 'hollow crank arms', but sometimes you get that on 'SLX' as well. Usually the chainrings are lighter, but not necessarily more durable.
The advantages of XT are mostly in the shifters, which have 'instant release' and other features making them nicer to use, and in the rear derailleur which tends to be better quality.
You could definitely upgrade your bike to something more like the Marlin 7
https://www.trekbikes.com/us/en_US/bikes/mountain-bikes/cross-country-mountain-bikes/marlin/marlin-7/p/33148/?colorCode=orangelight_red
but this would need:

new shifters (XT are the best choice)
new rear derailleur (XT is the best choice)
new front derailleur (Deore is fine)

on top of what you already need which is:

crankset
probably new BB
cassette
chain

And these parts would be more expensive ones as well.
Doing that is fine, the problem is having XT parts and that awful fork is kinda not a good match.
So you're likely better off looking for a used 3x10 speed bike if you wanted to go that route - it would have better parts all around.
BTW I'd recommend the X8 chain for higher durability rather than the lower Z series you have.