In order to compare the X-wind with observations, one needs to be able to calculate its thermal and ionization properties. We formulate the physical basis for the streamline-by-streamline integration of the ionization and heat equations of the steady X-wind. In addition to the well-known processes associated with the interaction of stellar and accretion funnel hot spot radiation with the wind, we include X-ray heating and ionization, mechanical heating, and a revised calculation of ambipolar di †usion heating. The mechanical heating arises from Ñuctuations produced by star-disk interactions of the time-dependent X-wind that are carried by the wind to large distances where they are dissipated in shocks, MHD waves, and turbulent cascades. We model the time-averaged heating by the scale-free volumetric heating rate, where o and v are the local mass density and wind speed, respectively, s is the distance ! mech \ aov3s~1, from the origin, and a is a phenomenological constant. When we consider a partially revealed but active young stellar object, we Ðnd that choosing a D 10~3 in our numerical calculations produces temperatures and electron fractions that are high enough for the X-wind jet to radiate in the optical forbidden lines at the level and on the spatial scales that are observed. We also discuss a variety of applications of our thermal-chemical calculations that can lead to further observational checks of X-wind theory.