In LaTeX, how can one add a header/footer in the document class Letter?

With regard to Brent.Longborough's answer (appering only on page 2 onward), perhaps you need to set the \thispagestyle{} after \begin{document}. I wonder if the letter class is setting the first page style to empty.

After I removed

\usepackage{fontspec}% font selecting commands 
\usepackage{xunicode}% unicode character macros 
\usepackage{xltxtra} % some fixes/extras 

it seems to have worked "correctly".

It may be worth noting that the headers and footers only appear from page 2 onwards. Although I've tried the fix for this given in the fancyhdr documentation, I can't get it to work either.

FYI: MikTeX 2.7 under Vista

Just before your "Content of the letter" line, add \thispagestyle{fancy} and it should show the headers you defined. (It worked for me.)

Here's the full document that I used to test:

\documentclass[12pt]{letter}

\usepackage{fontspec}% font selecting commands 
\usepackage{xunicode}% unicode character macros 
\usepackage{xltxtra} % some fixes/extras 

% page counting, header/footer
\usepackage{fancyhdr}
\usepackage{lastpage}

\pagestyle{fancy}
\lhead{\footnotesize \parbox{11cm}{Draft 1} }
\lfoot{\footnotesize \parbox{11cm}{\textit{2}}}
\cfoot{}
\rhead{\footnotesize 3}
\rfoot{\footnotesize Page \thepage\ of \pageref{LastPage}}
\renewcommand{\headheight}{24pt}
\renewcommand{\footrulewidth}{0.4pt}

\usepackage{lipsum}% provides filler text

\begin{document}
\name{ Joe Laroo }
\signature{ Joe Laroo }
\begin{letter}{ To-Address }
\renewcommand{\today}{ February 16, 2009 }
\opening{ Opening }

\thispagestyle{fancy}% sets the current page style to 'fancy' -- must occur *after* \opening
\lipsum[1-10]% just dumps ten paragraphs of filler text

\closing{ Yours truly, }
\end{letter}
\end{document}

The \opening command sets the page style to firstpage or empty, so you have to use \thispagestyle after that command.