I think that if the overhead is relegated on the loading phase of the game or levels this is file.
Real Time parsing shold be avoided like Ebola, IMHO, unless you use highly optimized parsers (so no generic w3c.dom).
The question is another: is real so simple to maintain an XML for modding instead of creating a dedicated tool?
Take my case (spoiler of the upcoming new & first totally ours title, here

): we have a decent economical engine and we are working out a research & development engine to create the first preview version of Xplore! our 4x space game (with simplified approach, more like Anacreon than my personal favourite Space Empires, and also more diplomacy and economics oriented).
We used XML for asset data (you know, veichles, research and so on) and it worked pretty well, though, maintaining it is equally cumbersome than using the old txt files of Space Empires (I publicly modded AI and Races for that game for years).
In the end, we are seriously thinking about editors anyway, since the game will probably require a lot of tweaking by testers and modders to keep the game entertaining & to cope with all the potential pitfalls that even a good design document cannot foresee.
So: XML can be cool, but using XML alone is just dumb like any other media for content-heavy projects, for many projects tools are inevitable.