I'm going to first of all assume that the XML parser operates correctly. If it is incapable of reading files, well the solution is obvious.
Which leads us to look at how the file is created. When you call SaveToFile, the file is opened, written, closed and buffers are flushed. In a plain vanilla system, your XML parser will see the entire content of the file. The only conclusion is that something is interfering. The most like suspect is your virus scanner. Many scanners, even the most respected ones, cannot properly handle a file being closed and then immediately re-opened.
The bottom line is that your code is fine and the problem almost certainly lies with your local environment.