I tried out xmlrpclib on the trunk (2.6) with sgmlop-1.1.1 and it works just fine.  At the moment I don't have time to try out PyXML, but seeing that the most recent sgmlop works with xmlrpclib makes me lean towards not removing sgmlop support (not that I have a say about it, but still).

How did you install PyXML? If it wasn't from source or from an installer compiled for 2.5, that might be a problem. If PyXML installed from source or compiled for 2.5 still causes this problem, it could be that it needs to be updated to the current sgmlop.