Daniel Cazzulino, one of our breed, shares this perfect blog posting about a super efficient way of passing XML data as XML, but without loading full DOM on the server side.
Started here and here.
I especially like the availability of arbitrary positioning of XPathNavigator to only serialize the bits you are interested in.
The only limitation of this solution is that it does not ship with FX 1.0/1.1 and you have to be a master in XML to fully grok it. But hey, if you don't, you can still use XmlDocument as a return type. :)