XLR vs USB Specifically for UTAU

In my opinion, it's not worth upgrading to a proper XLR based microphone setup unless you're trying to get really serious about developing voicebanks for UTAU, or if you're doing other serious work like a lot of singing or recording instruments.
The typical UTAU user is a hobbyist, and for that purpose a decent USB microphone can take you far.

Does it make a difference? Well, microphones are only one of several factors that go into a quality voicebank. Starting from well recorded samples with good vocal technique is where high quality voicebanks begin. So it does! But before you want to start spending money, try working on other skills first.

Though I have been using UTAU for several years, I'm still using a basic USB microphone, because my focus is on areas other than the audio quality of my own voicebanks. My friend @_caustic_ on the other hand knows so much more about that kind of stuff, and is your go-to man for asking about microphones. I'm thinking about moving to XLR eventually, but the reason for that is because I will already have the relevant equipment for recording guitar, and adding a microphone won't be as significant of a leap for me.

XLR microphones have better voice quality than USB ones as long as you have a sound card AND pop filter. Computer's build-in soundcard aren't good plus KTP (and sometimes S, SH, F and CH too) sounded horrible without an external pop filter.

I have Røde Podcaster Mic: what I know is that it is quite pro level XLR mic for podcasting, singing etc. (disclaimer: Technically I don't own Røde. I just happened to be super lucky to have a father who didn't need his HQ mic, so I'm borrowing it! My old mic that is actually mine is much lesser quality than his what I use nowadays) Røde's website stays that the mic has "build-in pop filter" but to be really honest that's very *cough* BAD and in my opinion a garbage information. After spending some money onto pop filter made a HUGE difference on sound quality: I was finally able to make non-Japanese VB that has aspirated consonants (eg English and Chinese) without worrying about horrible "popping" sound plus able to record POWER VBs in general. (So basically I want to say that no matter WHAT brand/model your Mic is you SHOULD use pop filter. If cannot spend $5~$30 on pre-made one, you can always make one very cheaply: there's many tutorials to do that in internet)

Other thing I want to say that XRL mic won't make your VB automatically awesome: SKIILS, RECORDING TECHNIQUE, RECORDING AREA (no echoing nor any big BG noices, quiet room!) and MIXING/TUNING are the most huge factors in my opinion. Of course Mic DO matter: as long as the Mic quality is at least something similar like in Snowball/blue yeti, you're fine. That quality is high enough for a good/descent UTAU VB (UTAU called Al!ce.16 is very good example).

In my opinion: if you do UTAU just for fun, as hobby, there no point to spend more than ca $100 on mic + pop filter. The only good reasons to buy more high quality equipments are that you have other hobby/career that requires a good mic (singing, podcasting, making YT videos, music production etc) I see no point to put too much money on to UTAU only TBH. I'm super honest but I think that many UTAU that are recorded with Blue Yeti USB Mic has overall way better voice (sounding more natural, "human-like") and more vocal range than mine UTAU even if I have technically "better" equipments). So skiils=/=equipments=/="your UTAU is awesome"

Good equipments etc sure do help but if have super generic or bad voice (or otherwise very Gachapoid-like hard-to-use voice type), then don't expect to your UTAU to become very famous and be used by dozens or hundreds of people.

This is a rock hard truth but only very tiny amount of people actually has "ideal" (or nearly "ideal") good voice of UTAU and even fewer people only has very standing out "unique" voice such as Kohaku Merry or Namine Ritsu: only very few people are lucky to have an "unique" voice (hey, there are nowadays over 5000 UTAU VB/characters out there!)