Hi Keith,
I did a few tests, my processes are different from yours, just want to share my experience. Here are my steps,
1) Select one polygon using attribute from feature class 1;
2) Select polygons from feature class 2 that intersect with the polygon from the above step.
The FC2 contains about 800,000 polygons, and the polygons being intersected are about 8000.
The first test was done in ArcMap. The response times for the second selection are,
SQL Geometry: 23.66 sec
SDEBinary: 19.19 sec
The second test was in SSMS. The 2 selection steps were merged into one SQL statement. The response time is 4 minutes 36 seconds.
Both ArcMap and SSMS were launched on same client computer. The SQL geometry FCs and SDEBinary FCs are in different DBs, but under same SQL Server instance. The configurations of the two DBs are not same, for example, the sizes of data files are different. (Ahu..., Apples to Oranges).
I don't think my tests are conclusive in terms of performance. If I have to decide between SQL Spatial and SDEBinary, instead of performance, I would ask myself a different question.
Just my opinion. Thanks!