The XML data type was added in SQL Server 2005. You need to make sure
your local instance is SQL Server 2005/2008. If the database was
upgraded, then you can check the compatibility level (under Database
properties, Options) and make sure it is set to SQL Server 2005 (90) or
SQL Server 2008 (100).
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Plamen Ratchev
http://www.SQLStudio.com