Hello dkumar welcome to Forums
Answers to your questions.
1. You can use existing XML only to design InfoPath forms. To do this Open InfoPath -> Design a Form -> Select New from XML Document or Schema from task pane.
2. One question that I have for you is – You said add, edit/modify data what does that mean. If you are trying to add, edit / modify just the data in the nodes then you can do that via InfoPath if you have field for that in UI. If you are trying to add, edit/modify nodes in XML then each time to add, edit/modify a node you need to design the form as I said in 1st point.
3. In order to add, edit/ modify data to a new sql server database you need design a form using Data connection. To do this Open InfoPath form -> Design a Form -> New from Data connection. In this case you should have a sql server database created before hand.
Hope this helps!