At work we are being asked to create XML files to pass data to another offline application that will then create a second XML file to pass back in order to update some of ou
Others have covered how to differentiate between attributes from elements but from a more general perspective putting everything in attributes because it makes the resulting XML smaller is wrong.
XML is not designed to be compact but to be portable and human readable. If you want to decrease the size of the data in transit then use something else (such as google's protocol buffers).