1) If the form is being used internally on the same network (ie: the xml file is always availabe via network to th form), the form can query local files, but this requires advanced scripting.
I haven't done it with shared network drives tho. - if you do, I use solution two
2) Assuming you use LC Reader Extensions and the form is 'all over', not always on the originating network.
- Expose the XML file via a webservice (if it is not sensitive data)
- Get the form to query the webservice
3)But if you have LiveCycle installed with Forms.
Use the readXML component and then bind the XML with the Form.