I assume that many cities are fixed, relatively small and unlikely to be updated (you can always add new ones for spelling). In this case, you can select a city from the drop-down list that is loaded from the XML file and save the selected value in the database in a column. I would avoid using user input because of the chances of incorrect input.
If you have a more hierarchical structure in which cities are in counties that are in states, then a tabular approach might be more appropriate since you can have cities with the same name in several places. In this case, I think that cascading drop-down lists are easier to manage with database queries than with XML.
Note. There is probably no βrightβ answer, as it depends a lot on your circumstances.
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