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Which line is producing the eror?
It says "var myXML:XML = new XML();" is producing the error.
In 1.5, it is not legal to do much work outside of a function, and what you have would not compile if it is not in a function.
I figured it out I was using the code the help file used but it wasn't working. SO, I started working on it and all I needed to do was to declare the XML data model source and to declare the root node.
<mx:Tree width="397" height="295" id="outline_tree" labelField="@label_en" showRoot="false" verticalCenter="2" left="25" alpha="0.45">
<mx:XML source="outline2.xml" id="mainFolder"/>