A player has 5xp he has not spent. As the session is in progress, it comes time to make a Streetwise check. The character has a 2 Cunning, but no ranks. He then wants to spend his 5xp (right now) to add a rank in Streetwise before making the roll. Is there a rule/guideline forbidding that? Is it:

A) "Okay, spend it. But no take-backs."

B) "No. You can only spend XP before or after a session, not in gameplay."

I do not believe there is a guideline specifically stating either way. The general assumption is that it would be spent between sessions, and legally speaking, that is the easiest way to go about it.

That said, here's how I've gone about it: If the player flips a DP, they can spend the XP (no take-backs, of course), but they shouldn't have an XP slush fund ready to fill any need that arises in the session. If I feel that it's being abused, I'd probably retract the option. This is largely based on the goodwill of the players, and if you have players who will exploit everything, this isn't wise.

Points for and against this: If a PC hasn't decided yet where to allocate XP, this can simply help the decision process. Plus, it's XP they could've spent earlier. They'd have the thing if they'd chosen to spend the XP earlier. They did earn it after all. However, this is a two-way street. They'd have the thing if they'd chosen to spend the XP earlier, they shouldn't just save the XP and wait to purchase something relevant. And lastly, impromptu spending can be of detriment to the player. If they are saving up for something, that short turn benefit might hurt them in the long run.

the DiceForBrains podcast had a houserule that players could do this at the cost of a DP flip. It didn't break the game and can encourage characters with more breadth.