Some of the poor performance is down to your xpath and the use of both .vaue and .query.

This is somewhat quicker. (Though it is never going to be as quick as using a table variable parameter)

ALTER PROCEDURE [dbo].[UpdateTableViaXML3]

(

@data xml

)

AS

SET NOCOUNT ON

DECLARE @ErrMsg varchar(100),

@ErrNo int,

@ErrSeverity varchar(100)

BEGIN TRY

UPDATE PODetailTest

SET OrderQty = T.PO.value('(OrderQty/text())[1]', 'smallint') ,

UnitPrice = T.PO.value('(UnitPrice/text())[1]','money')

FROM @data.nodes('Root/PurchaseOrderDetail') AS T(PO)

WHERE T.PO.value('(PurchaseOrderDetailID/text())[1]','int') = PODetailTest.PurchaseOrderDetailID

END TRY

BEGIN CATCH

SELECT @ErrMsg = 'An error occurred in stored procedure ' + ERROR_PROCEDURE() + ': ' + ERROR_MESSAGE(),

@ErrSeverity = ERROR_SEVERITY()

RAISERROR(@ErrMsg, @ErrSeverity, 1)

END CATCH

GO