Hi - if you look at the properties for the drop downs, you'll see they are set to store ID (value) and display a different field - so what is stored in the XML is the ID - which as you mention is less than helpful when exported to Excel. You'd see the same thing if you opened the XML in a text editor.
You have some choices - you can change the drop downs so the value is the same as the display, or you could include additional fields in the form (that you don't put on the form itself) and when the drop down changes, you could populate those fields with the display value, so that you'd have both in your XML.
Hope that helps!