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XML is a datastore, just as Oracle or MySql are datastores. Oracle and
MySql have API's that help you get information into and out of their
datastores, but ultimately they are datastores just like XML. You can
use a flat file as your database, even for very complicated missions.
Some of the biggest database services in the world are run from flat
files. For instance, Lexis/Nexis, which has huge databases on law and
news, runs their services from flat files. The Lexis division keeps a
separate flat file for each state (it tracks court rulings from the 50
states of America). Lexis was using a proprietary markup for its flat
file database, developed in the 1960s, but it has recently switched to
XML. A close friend of mine was the lead on the conversion project, so
I know some of the details.

If you have a flat file like XML and you put it on a server that has
enough RAM to keep the whole thing in memory at once and then you write
a bunch of code to deal with inserts and transactions and selects, you
will find that in a short time you've written your own database API for
your XML datastore.

It doesn't matter (or at least, from what you've said, it is not clear
to me) where you store your data, you can format that data using style
sheets after it is pulled out of whatever datastore you choose to use.