Hi,
I think that it would be a conceptual difference. XML is graphic concern free. It’s a data medium. That means that based on that semantic piece of data you can have multiple output where styles will be applied based on the tags. So you can do print or digital PDF either with InDesign or through a XSL-FO engine, HTML and ePub. Consider XML as a semantic central point from where many graphic output will be possible.
Word is already a graphic tool as you apply styles. You are coupling meaning and representation. I don’t know all the output possibilities from Word but I guess some channels would require more steps to reach. It’s probably less scalable than XML and would require more work in case of changes.
You can also think of continuity. Word is a proprietary format and would always require software to edit the files. XML is just open text that will still be editable. In terms of archives, it’s interesting. Also lighter I guess.
Finally, updates can be easier to deal with with XML. You would just refresh your channels and the output will reapply accordingly. Any changes in the word source may affect a lot of things. Just to be clear I am not saying word is bad or that XML is problem free. I am just giving my feeling ;)
HTH,
Loic