"can we also use a path where the XML file exists."

I'm pretty sure that you can't reference files directly from within TSQL. If you really, really HAD to do this, you have to open a command shell and/or create objects with sp_oa* procedures. I'd strongly recommend against both. They're basically stepping outside of the realm where TSQL peforms consistently and well.

You know that you can pass procedures a TEXT data type so that you're not limited by the 8K of varchar (or 4k of nvarchar)? That's how we do it now. If you have to load really huge files, instead of using OPENXML, look into XML Bulk load in BOL.