XMLization of the web is bound to happen sooner are later. Already several websites deliver content in XML format. One of the popular XML tool vendors Altova of XMLSpy fame, announced Stylevision(TM) for building XML websites and converting HTML websites to XML. In my opinion, XMLization of the web is the first step towards moving to the Semantic Web.
When content travels from a backend database to the web page, somewhere along the line the semantics are lost. This problem can be avoided by keeping the web content in XML. Also, you get a host of other advantages like the easy repurposing of content, ability to exchange rich data with other applications, etc. This ability just gets us to the first step of an immensely interoperable web.
IDC predicts that the XML tools development market will reach $395 million by 2006 at a compound annual growth rate (CAGR) of 41%. While most of the web publishing is about content, increasingly websites will merge content with applications. This movement opens up entirely new opportunities for XML components. It will be interesting watch evolution in this space.
Update – May 2016
It did happen (XML as the content format for web) and was dropped for html5. There are several reasons for this shift. XML, however, continues strong and appears in places you don’t expect (for example, as the definition of UX).