Arpan has posted on some of the reasons for XmlDocument being the main XML store in System.Xml and the difficulty of supporting standards that are not yet at a recommendation status. Ironically I now find myself in the alternate universe to this where WS-* specifications seem to pop in and out of existence on a daily basis, having to incorporate these into a fast changing project that is laying the path to Indigo. I have been working on WSE 3.0 planning this week and hope to post some more details of the release in the coming weeks. Currently these are the WSE 3.0 themes that I am using to drive the project, which sets the precedence for the features.
As always you have to pick from a huge pile of features and I wish that the team was three times as big. Fortunately other constraints such as being backwardly compatibile with previous releases are not necessary with WSE and so this makes it easier to incorporate new features and remove redundant ones, which creates a very dynamic project.