Is it possible to bundle XML parser (SAX) into Linux kernel?

Answer 1

In theory it is possible to put an XML parser into the kernel but you almost certainly do not want to.

The kernel exists to allocate resources and do other things to provide services to running user programs. An XML parser falls into the category of a user program. It uses libraries to do operations like read a file, which in turn call the kernel and have it do something, like read that file.

Most major Linux distributions ship a SAX implementation, several usually, in various programming languages. Use those.