Posting this to be thorough. This is what I found:
Supposively, since XML is not normal url encoded post data - it should be stored in $HTTP_RAW_POST_DATA. But...
In PHP $HTTP_RAW_POST_DATA only exists when the mime type of the POST is unrecognized. This is a problem when it's flash submitting XML.
Here's a informative link:
Apparently it's a PHP limitation and has nothing to do with Flash. Unsure if the PHP developers plan on a fix.