There's no performance penalty to using Riverbed LRU mode. The key thing to keep in mind is that for proper performance, "peer" Steelheads should both have the same setting (be it FIFO or LRU), which is why it didn't come turned on by default when we introduced the feature (since customers don't always perform RiOS upgrade of all devices in their network at the same time).
As for whether it outperforms FIFO, it's really workload dependent. There's plenty of workloads where the two will perform roughly similar. But for many backup/replication type workloads in particular, LRU can be a noticeable improvement.
