Hehe, you're right. BZ2 uses the .xsi files directly, which I guess is stupid even if you're not going to have animations on it, since ASCII files are much bigger than binaries.
Maybe for BZ2 you only need a mesh with texture data on the .xsi, so it's not such a big deal. But I don't think Pandemic is gonna use ASCII .xsi files for SWB. I guess I'll have to wait to find out.