wow, great question! I've used sed in a very limited (that is, my knowledge of it limited me...) fashion on a couple occasions. but I have no idea about this. i'd be interested to see anyone's replies as well.
There are probably 100 different tools you could use to do it If you wanted you could do it with sed, with awk, with perl, tcl, php, c, c++, pascal, basic, lisp, elisp, python, etc etc etc
Well, there is an XML extension for applescript that might be easier than manually sed'ing the file. (Doing brute-force 'sed' on XML's is usually a pain, I can assure you).