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Yes you're right again but using something like fop could do that, the xml and css files would only describe the structure and layout like it's done with the .tex file right now. Typesetting would be done with fop by example. I totally agree that pure static xml+css files would be useless for typesetting .
I think this could work (I can't see why it couldn't) but anyway that's pure speculations and I may miss the whole point!
Nice to discuss that with you btw, it's been on my mind for some weeks when I should concentrate more on my work !