The System Functions are classified as Scalar Functions.

Reference BOL:

Scalar Functions: http://technet.microsoft.com/en-us/library/ms174318(SQL.90).aspx

System Functions: http://technet.microsoft.com/en-us/library/ms187786(SQL.90).aspx

Using a System Function such as CAST and CONVERT against an xml data type is permitted. Ref:

http://technet.microsoft.com/en-us/library/ms189887(SQL.90).aspx

Therefore, the BOL entry referenced by the answer is incorrect. Since the documentation is conflicting but certain scalar operations are permitted, the provided answer is incorrect.