don't know if i understood your question right.
I can explain the function:
XMLSTR createXMLString(int nFormat=1, int *pnSize=NULL) const;
It simply creates a string which contains the xml structure of the current node and all of its children.
The only place where it is currently used is in GameEngineCore\GameEngine.cpp(147). where the children of the Extra node of the *.scn file is converted to a string to call createGameEntity(const char* xmlString).
But as this function at first parses the string to an xml node again, it would be cleaner to implement an overloaded function createGameEntity(const XMLNode&) where you can pass the node directly.
By that you won't actually need to reimplement the createXMLString() function, but I also think such a function could be useful anyway. Doesn't rapid xml provide something like that?