The performance limits were explored for an X-ray Diffraction based explosives detection system for baggage scanning. This XDi system offers 4D imaging that comprises three spatial dimensions with voxel sizes in the order of ~(0.5cm)3, and one spectral dimension for material discrimination. Because only a very small number of photons are observed for an individual voxel, material discrimination cannot work reliably at the voxel level. Therefore, an initial 3D reconstruction is performed, which allows the identification of objects of interest. Combining all the measured photons that scattered within an object, more reliable spectra are determined on the object-level. As a case study we looked at two liquid materials, one threat and one innocuous, with very similar spectral characteristics, but with 15% difference in electron density. Simulations showed that Poisson statistics alone reduce the material discrimination performance to undesirable levels when the photon counts drop to 250. When additional, uncontrolled variation sources are considered, the photon count plays a less dominant role in detection performance, but limits the performance also for photon counts of 500 and higher. Experimental data confirmed the presence of such non-Poisson variation sources also in the XDi prototype system, which suggests that the present system can still be improved without necessarily increasing the photon flux, but by better controlling and accounting for these variation sources. When the classification algorithm was allowed to use spectral differences in the experimental data, the discrimination between the two materials improved significantly, proving the potential of X-ray diffraction also for liquid materials.