Hi Stone,
Any XML format will work, just make sure the tags match up. For example:
<Data>
<Group>
<Field1>Value1</Field1>
<Field2>Value2</Field2>
</Group>
<Group>
<Field1>Value3</Field1>
<Field2></Field2>
</Group>
</Data>
You can use Notepad to save, just make sure you save as and specify a name in double quotes "data.xml" so it doesn't tack .txt on the end of it.
Another option is to use OWSSVR.dll to filter the list on SharePoint. qRules v2.0 includes a command to dynamically set the OWSSVR query. Check out the documentation here: http://www.infopathdev.com/files/folders/49214/download.aspx