On a recent whirlwind visit to Shanghai I felt duty-bound to survey the state of Xiaolong bao in its native habitat as best I could in the time I had. I hit perhaps 10 places ranging from XLB's cradle at Cheng Huang Miao to the Pudong Airport food court, and will have a detailed report on my own website later, but the nitty gritty in a nutshell (no, not literally) is:
1) The Nanxiang Steamed Dumpling shop has, lamentably, declined greatly in quality over the past 10 years or so and cannot seriously claim to have the best xiaolong bao around. The wrappers were thick and gummy, and the solid filling overly chewy. Only the "soup" inside was as it always has been, satisfyingly intense in flavor.
2) The upstart Taiwanese Din Tai Fung chain (Xintiandi branch) is beating the Nanxiang on its own turf with baozi nearly the equal of the Nanxiang in its heyday. The wrappers equalled the best I have ever encountered, though the solid filling was slightly gritty and the soup a bit lacking in sharpness of flavor. DTF, however, is ridiculously expensive (RMB 45 for 10 pork XLB) and quite stuffy for a dumpling shop.
3) The best XLB in town may be at a modest corner shop on Henan Nan Lu (#238) at Wenmiao Lu. I was tipped off to this place by a xiaolong bao-crazy blogger and a couple of locals. The wrappers, meat filling and soup were all done just right, matching the pinnacle of perfection I first encountered at the pre-redevelopment Nanxiang in 1992. They were markedly better than DTF's, at about 1/10th(!) the price -- RMB 6 for 12 dumplings (that's 75 cents US, folks). Beware that the place is small and very popular around lunch time.