Access superior in some way to anything! Really?  I didn't even know that Access had anything that could be called security.

Unless that password stuff is being referred to as security.  I've occasionally been asked what can be done with access databases that were password protected and someone forgot the password.  It usually takes about 1 minute (on a slow machine) to crack. 

MSDE's advantage is its free but you can't use it for more that 5 simultaneous connections.  I agree XML is probably not a great performer.  You may need to think about both security and performance.  MSDE has limitations as to how big the database can be as well.  In my opinion Access is usefull for a single user on a single workstation.  MSDE is good for small databases with < 5 concurrent users.  Otherwise SQL Server may need to be reconsidered.  XML is great for tranferring info from some system to another but not so good as a multi-user data store.  Just my 2 cents.