I have fantastic experience and results with my X-E1 using legacy lenses.
For M lenses I recommend Hawk's M adapter with close-up helicoid.
It really worth being able to shoot this lenses closer.
I use a code for each lens and set the camera immediately when mounting a lens so it will be recorded on the metadata and I will know afterwards which lens was used. For instance I use 1 for pinhole, 25 for my Pen F 25/4, 37 for Summaron, 38 for Pen F 38/1.8, 39 for Jupiter-12, 40 for Summicron-C, etc. 18 and 35 are my Fuji X lenses and it will be recorded automatically, of course.
From my experience, lenses that work and look great in it are Pen F 25/4 and 38/1.8, Summicron-C, Jupiter-8, Jupiter-12 (80xxxx or younger), Summaron 35/3.5, Summitar, Canon 50/1.4 ltm, Jupiter-11, Elmar 50/3.5, Industar-22.
I also use the Fuji X 18/2 which is great for a 28mm equivalent FOV, sharp, small and light.
I also have the Fuji X 35/1.4 which is stellar. But I mostly use the 18/2, Summicron-C, Pen 38/1.8, Jupiter-12 and Jupiter-8. Sometimes Canon 50/1.4, which looks also great.
One of the great aspects of this system is that it has very good wide angle lenses. For instance the 18/2 for very portable and the 14/2.8 for a superb one. The 18 end of the 18-55 zoom is also excellent. I don't like the 27/2.8 though.
And the 35/1.4 is a really excellent lens too.
Of course lenses from SLR systems (OM, C/Y, etc.) will look great too, but the adapter will be larger. M, ltm and Pen lenses will be the smallest. Contax G too but focusing is not very nice. (c-mount will be even smaller but there are very few lenses that will cover the whole APSC sensor area)
I have several Fuji X galleries on my Flickr where you can see how several legacy lenses look on the Fuji sensor.
JPG conversion on camera is very good but I also use RPP (Raw Photo Processor) software which is simple and excellent.