varbinary is for binary data.
nvarchar is for character data.
Regardless of what the full text index is capable of indexing, use a data type suited to the domain.
Also, you will be able to see the contents of a nvarchar column in directly SSMS.
Performance issues are more likely to do with the frequency of maintenence of indexes, and hardware such as where your data is stored (as in a separate Filegroup), and memory usage, and indexing type (full population, incremental, manual, and auto change tracking population).
Note that SQL Server 2008 full-text search is more aggressive in
memory usage and may use more I/O; 64‑bit architectures are better
than 32‑bit in doing crawl tasks in general.
Sometimes crawl can be too aggressive in committing memory and this
could cause sqlserver/system to have fewer resources than needed. It
is highly recommended that you do the following:
Limit the memory used by the crawl (full population) by setting max server memory to an appropriate value to prevent the crawl task from
taking all available memory.
Increase the page file size if applicable.
Indexing performance is generally superior to SQL Server 2005.
However, in certain situations there may be some performance
degradation as follows:
Crawl on large documents (~>8KB). In non 64‑bit platforms, this might be slower in some scenarios.
varchar type data. This is because SQL Server 2005 does a better job with the varchar type than with a text type, whereas in the new
full-text architecture there is no difference in theory between varchar data and text data.
Noninteger keys, especially GUID columns used as a full-text key
Too many unique keywords. It has been shown in random document crawl modes that performance can be slower than SQL Server 2005 (when
uniquekeycount > 80 million).
Ref: SQL Server 2008 Full-Text Search: Internals and Enhancements
