if i may: you dont need just a core improvement, your major need for making a competitive component is:
- a front end entirely "rethinked";
- more interaction beetween users
- better graphic (icons is just a little thing, and i'm afraid of your frontend improvement is about just those little thing, like grid list and square avatar, i really hope i'm wrong)
- avoid every awful js alert() and use a flexible and scalable notification system
- the registration form should be an entity APART: the developers may needs a fields order in registration and a DIFFERENT one in profile page
- an integrated Event system
- the possibility of find users with similar interest (in other words: a Tag system)
- you need an ajax serious integration, for little operations like change photogallery page or add connection button, and so many others, you NEED ajax.
- CB activity is kinda useless for a serious usage: if a user upload 3 photos or edit his profile twice in a row, those records should be merged and well formatted..as every other social component does

this is just a few things..

I think that good code will make a good product so welcome XML both in front and back-end.
But I am also agree with "thewebsurfer" about a better UI and UX and completly agree about registration process.

I also completly agree the thewebsurfert...

If you look at facebook historie then: usability hits function => the success from facebook was speed and easy/slim layout. Other system (friendster for example had more functions...)