Sorry but you just can't do this.
Same answer as http://forums.adobe.com/thread/575192.
You need to load your xml in one field in your form, then parse the content and then do the binding manually.
Thanks a lot Jasmine for your response and patience.
Why I am still working on this is because I came across another application, where a similar xml variable has been defined and referenced with an XSD, but acting as an input variable. In that application the service is invoked by a Java UI. I used a software called soapUI to track the wsdl file being generated during invoking the service for that application, and found that although the xml file generated by the input variable of xml type is contained under the document tag, there is no CDATA section associated with it. Please find below the part of the WSDL file.
<se:inWatermark>Working Draft-Not for Client Delivery</se:inWatermark>
The boldened and italized section of the above excerpt is the one that is derived from the xml variable. Can you give me some cue on as to why this works this way? If I manage to get the response in the above format, will I be able to do the binding?
This is a Form Designer limitation.
When you make the web service call and get XML back, there is no way in Form Designer to bind the response directly to fields on the form.
Thanks a lot for the prompt response Jasmin. You were really very helpful.