I am currently making a game in the style of Terraria. I honestly don't know if Terraria is using chunks, but I have my doubts. A few weeks ago I came to the step where I wanted to save/load my world. Before I did that I made a world equal to the size of the large world in terraria, and loaded it all into memory. I wanted to see how much memory I spent compared to Terraria. As it turns out there wasn't much of a difference. I can't remember the numbers atm. but I started up Terraria and made a map of each size, and then loaded them while watching how much memory terraria took. The game took considerably more memory when I loaded a large map, compared to a small.

I just tested. Starting Terraria it uses about 450MB RAM. After loading a large map it uses about 860MB of RAM. Where a small map totals at about 500MB of ram. In comparison my game currently takes about 895MB of RAM with the large size map.
I have a larger size map, roughly 20% bigger than the Large terraria map, and my game runs smoothly (on a high-mid end pc).

So unless you're planning on making maps much bigger than terraria, the only other option I see is creating multiple worlds, and have somekind of "zoning" when changing world.

As for the language, I use XNA, and I am very happy about it. I started my project in Unity, but I ran into performance issues very early on.

So in short- based on my experiences I'd say:
- Go with XNA.
- Just keep your level in memory, unless it's going to be very large.
- Remember to keep variables in your tiles (if any) as small as possible. With so many tiles, it adds up extremely quickly. (My game used to take up about twice as much RAM).

Good luck

Thanks. Phantobra is the project I've learned most of what I know now. It's like a learning by doing project, which has grown to be much more than I initially thougth possible

Is Microsoft abandoning C#?
In short - I don't think so. I think XNA will continue. I've read around on the internet and although there's a lot of people who believes it won't, I found an article with a bit more optimistic view, and he does a good job explaining why.. This article is from 2011 though, but check it out:
http://andrewrussell...a-in-windows-8/

Good luck with your project - I'm curious to know what your choice will be, so drop me a line, once you do