If I have XC on the one wallet card, can I exchange for local currency FIAT? or is it only exchange crypto for crypto.

Yes, according to Antoun, XC will be [exclusively] exchangeable for up to 9 fiat currencies & BTC via cashless BTC ATM's.

If I were withdraw would fiat be sourced from a sell on an exchange? If so, would withdrawals lower the price with every use?

hope they dont take from the "sell order"
if so, its not only 0.3% fee
well, 0.3% is the fee, and some % is the loss for us Cheesy