At the suggestion of a friend, I checked out a web site (wowarmory.com) last night that is, to my suprise, completely developed using xml data sheets rather than HTML or XTML web documents. Granted, from an SEO perspective, this site is less than ideal. There is no real content for a search engine to index, and the site is designed for performing database queries. However, this technology could easily be adapted for use by pretty much any web site. For example, my own sites use a similar technology to allow our XML files to be displayed as "normal" web pages if the visitor tries to view them in a compatible web browser.
Granted, there are a few issues with this technology. For instance, this method is not backwards compatible. However, there are many benefits - improved code to content ratios, the ability to reduce server load and bandwidth requirements, improved portability of content to various browsing platforms, etc.
Have any of you experimented with developing a purely XML web site? Have you been able to get the site deployed successfully? And have you found any additional benefits or challenges from using this method?