XML is one answer, but not the ONE answer. Be smart use it when you need it.
It is like most other MS quickie tools, great to get started with, and a pain to get out of when you grow out of it and need something more suited for your specific 'big' project.
Wait until you hit the 4K limits around Windows and with SQL. Then you will want to leave the data in an XML file and only store a unc or url to the xml for later use.
In multi server systems with or without DTC, XML will eventually be to bloated to use when the transactions peak, (the same is true with MS transactional replication). The bloat hits the network as well as the server memory resources and is difficult to recover, even if you have a top of the line system.
Not just XML, but there is a whole world of interoperability opening up with Web Services, and XML (SOAP) is becoming quite popular. As a DB developer in a web dev group I've had first had experience with the power that comes with web services. This is definitely THE "killer app" for XML.
Like it or not, XML is here to stay, and if you don't use (for religious reason's or other) you're going to miss out on a lot.