Indexing is not necessary for Search to function. It is only necessary for using the Libraries feature and to be able to search for files from the Start/Orb Search box, and also to allow changing options for searching specific file types. Anyway, I did a test just now -- apparently Windows 7 Search does not search contents of xml files for all present text. I found this link that describes hoops to jump through. We need to be able to search xml files by plain text searching, not the default special filter MS placed for xml files.
http://blog.sdbonline.com/2011/09/windows-search-and-xml-files.html