No one was able to answer this. So there it goes:

When explicitly setting the event onafterupdate, to a particular function,
like so:

<input datafld="Brand_Code" type="text" size="10" maxlength="10"
onafterupdate="myFunction()" />

the event remains intact after reloading the XML (
xmldataisland.loadXML(...) ). myFunction() is fired after amending the
Brand_Code value. BUT, if myFunction() is attached like so:

<input id="Brand_Code" datafld="Brand_Code" type="text" size="10"
maxlength="10" />

<script language="javascript">
Brand_Code.attachEvent( "onafterupdate", myFunction );
</script>

The event is empty after reloading the XML and myFunction() is never fired.

My workaround is to reattach the events after each reload, but I have
encountered what seems to be a timing issue which I have worked around using
setTimeout. It is all very ugly.

Has anyone got a better solution ?
I am only interested in solutions that dynamically will attach events once
and for all no matter how many times I reload the XML. Or if you are a Guru
you may have an answer to get around the timing issue elegantly; note that
the XML Data Island is synchronous (.async=false) and I have reattached on
all the documented XML object events (ondataavailable, ondatasetchanged,
ondatasetcomplete, onreadystatechange, onrowenter) without success; the only
thing that worked was to attach the event after half a second.

P.S.: I am using IE 6.0 SP1 and will need to run on both IE6 and IE7

A question that was asked in an attempt to get to the bottom of this was:

QUESTION:
Can you attach permanently via:
Brand_Code.onafterupdate = myFunction;
or does that disappear after firing once?

ANSWER:
In response to your question (I just setup a test to confirm this), coding
Brand_Code.onafterupdate = myFunction;
disappears as well once I have refreshed the dataset ( loadXML(...) ).
It continues to work as long as the dataset is not refreshed. The symptom is
the same as when using attachEvent.
The only thing that works is hardcoding in the HTML:

<input datafld="Brand_Code" type="text" size="10" maxlength="10"
onafterupdate="myFunction()" />

This could be by design, but if it is why do none of the events on the XML
dataisland enable me to reattach the event?
If it is by design, it is very poor design (unless I have missed something).