After a suggestion from Kurt Cagle, we have been using the eXist OpenSource XML Database for a week now and I must say that it has exceeded our expectations.
It was a snap to download a set up. It was easy to get all the XQuery demos running and it was almost trivial to administer the little but annoying things like adding collection and users.
Unfortunately I did have to actual read the documentation to figure out how to get our XForms and XMLSpy to work with it. But once you know the secret, it is easy.
The big secret is that by just adding the words "rest" or "webdav" before the "db" in the URL you automatically and to HTTP GETs and HTTP PUTs directly to your data.
You can also actually edit the data directly in the eXist database DIRECTLY from within XMLSpy by just using the "Open URL" option of the XMLSpy editor and then just slip the "webdav" string into your URL path. Hopefully XMLSpy will allow you to use the XQuery editor in future versions of the database.
I posted a short article on how to get XForms working with eXist in the XForms WikiBook
I have a FireFox T-shirt on order for Kurt and I am also buying beers at the first XForms conference...which I may have to organize.
Thanks Kurt! Your advise was very sound.