What kind of experience have people had with myisam and large tables, on the order of ~50GB(for a single table, other tables are ~2gigs including index)(I am not concerned with OS file size limits.) and billions of rows?

What are the most important settings to tweak in the my.cnf file? I have 2gigs of ram and 4 xenon processors.

I first tried prototyping my database with Innodb, but the transactional nature of it seemed to kill my performance. Am I crazy to not use Innodb? Is it a bad assumption that Innodb is slower? My evaluation is based on the usage of "load data infile" to create the initial values.

Here you can find something about table limits and OS limits:
http://www.mysql.com/doc/en/Table_size.html

InnoDB is very fast transactional database.If it seems to be slow for you then your problem is probably in your database design.

Performance of data insert could be imporved. Here you can find some optimisation tips for insert (and other) operations:
http://www.mysql.com/doc/en/Insert_speed.html
http://www.mysql.com/doc/en/Tips.html
http://www.mysql.com/doc/en/Query_Speed.html

Couldn't it be that a non-transactional database is faster than a transaction based? What would be the reason for keeping myisam around if innodb were better in all ways?

MySQL AB encourages the use of MyISAM tables for speed when transactions are not necessary (or required). The documentation does say that MyISAM tables can perform poorly when the DB serves mostly heavy updates and complex reads. http://www.mysql.com/doc/en/Design_Limitations.html
What you need to do is to analyze how your database is going to be used and weigh each table type's ability in that regard.