max,
i think no matter what, you'll have better resource usage and cpu efficiency if you use sqlserver. i know for sure that reading files from disk is much more intensive than reading databse info. of course, you could cache the info but of course, you'd do this in the DAL anyway in 'conventional' db usage.
i don't think i can offer support to your thoughts here as you'll be battling with an unknown resource - file size. it really could just get so big that you'd fill available shared memory just loading the 'latest' xml file. my advice, if you've got a seperate sqlserver instance, use it as it'll be almost certainly on a seperate cpu, therefore you'll be psuedo multitasking.
tough one tho, given the simplicity of xml. but for 'globally' updateable data, xml isn't a great choice as it certainly will tie up your local rsource usage which in turn means all other 'web' access to your site.
jimi
http://www.originaltalent.com