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The patch adds an XML codec. It implements encoding detection as
specified in http://www.w3.org/TR/2004/REC-xml-20040204/#sec-guessing
and supports externally specified encodings for both encoding and decoding.

I think it's good to add this; I don't have time to review though.

Nice codec !
The only nit I have is the name: "xml" isn't intuitive enough. I had to
read the code to figure out what the codec actually does. 
"xml" used a encoding usually refers to having Unicode text converted to
ASCII with XML entity escapes for all non-ASCII characters.
How about "xml-auto-detect" or something along those lines ?!

"xml-auto-detect" sounds OK to me, it even makes sense for the encoder,
because it normally detects the encoding to use for writing from the XML
declaration.
We could put "xml-auto-detect" into the alias mapping and keep xml as
the module name.
But I noticed I have to rewrap a lot of lines, before I check it in.

Leaving the module name as "xml" would remove that name from the
namespace of possible encodings.
"xml" as encoding name is problematic, as many people regard writing
data in XML as "encoding the data in XML".
I'd simply not use it at all, not even for a codec that converts between
 Unicode and ASCII+XML entities.

OK, I've changed the name of the codec to xml_auto_detect and added
support for EBCDIC.

Thanks, Walter !

Marc-Andre: Is this good to be committed, or does it need to be reviewed
further?

There was resistance in python-dev against this patch (see the thread at
http://mail.python.org/pipermail/python-dev/2007-November/075138.html),
so this issue should probably closed as rejected.
However there was consensus, that a detect_xml_encoding() function might
be usefull.