Now, there are a plethora of posts about it, and two of them really stand out:
- http://support.microsoft.com/default.aspx?scid=kb;EN-US;941105 – an issue with Windows Server 2003
- http://support.microsoft.com/kb/929668 – if SQL Server 2005 is a (direct) upgrade from SQL Server 2000
Also, you will find many blog posts suggesting to attempt a repair of the MSXM 6 (currently, at Service Pack 2).
I have another one to add to this: if the msxmlsql.dll file is where it supposed to be, namely: C:\Program Files\Microsoft SQL Server\90\Shared, and, of course, it is at the correct version level, it wouldn’t hurt to go to C:\Program Files\Microsoft SQL Server\90\Shared\Resources\1033 and look for the msxmlsql.rll.
In our particular case, it was missing, therefore… well, not working:-).
I hope this helps.