I'm not sure it would have been that simple.
If it had been a case where Xara would "wrapper" Inkscape, dropping their own product in favor of our codebase, and layering their commercial goodness atop, it might have been feasible that way.
The alternative would be for the Inkscape community to discard Inkscape's code and en masse shift focus to learning and working on Xara's code. Perhaps there were some expectations on their end that this would happen, and I suppose if they had gone 100% open source, and had respectfully engaged our community the right way, there might have been a chance of that. But I think Inkscape contributors loved inkscape too much to discard it; furthermore, their code was open but encumbered by a non-open renderer. The "developer agreement" we were required to sign felt weird, and made the situation feel not quite as free as just working in Inkscape.
A third option would be some form of merging of the codebases. We did look into this, and as I mentioned before it just didn't look doable technically.
It is very interesting to hear the communities side of the story. Xara made it sound to trivial in their FAQ.
Might be a good idea. If you'd like to start crafting up some thoughts on that subject, feel free to start a Blueprint (http://blueprints.launchpad.net/inkscape/), we could draw from when doing GSoC proposals if they choose to include Inkscape in their program again this summer.
Thanks. I have now added 2.
There were a couple efforts on their end to implement this, although I don't know what status they're at so you'd want to research into it a bit to see whether it'd be worth building off of it vs starting a third effort. The file format also has public documentation, which would make creating a converter a hopefully straightforward task regardless. I imagine it'd require a good bit of testing to address all the various corner cases.
What I would do is create a standalone xar2svg program, maybe with options for whether to use Inkscape namespaced SVG or plain. I believe both the previous efforts were geared towards this approach.
The second blueprint I added was for such a problem. I hope it will be picked up =)