I can see how Google can protect itself, but I don't see how it can (or will want to) protect every phone-maker. Of course, it can (and it must) protect people licensing/buying Android/phone from it, but that won't be much different from what MS itself does.

I think the problem with XML in this context is not readability; the problem is typability. XML is simply too verbose for this application. But then, an XML "OS" need not have an XML command line interface.