set the datasource of the report to the xml document. You will need to design the report to use the ado.net connection type. You will need the xsd file for the design as it tells CR if a field is text, int, boolean, etc.
Once the report has been designed using the xsd file, setting the datasource to the xml file will look just like you connected to database.
If you can get the xml file to contain the schema information as well, the xsd file is not needed.
Been designing reports this way for over 4 years, personnally, I like it way better than having to set up a connection to a database. Let the app know about the database, the report just displays what is fed to it.
HTH