To be honest, I don't even know why VAX is messing around with XML editing...
When I have my Tools / Options / Text Editor / XML / Tabs set to "smart", typing this in an XML file:
<foo>
will cause VS.NET to insert </foo> so that I have this (| represents my cursor location)
<foo>|</foo>
If I then press return and VAX is enabled, then the smart indenting doesn't happen and </foo> is placed at the beginning of the next line instead of smartly indented to align with <foo>. If I do the exact same thing with VAX disabled, then it indents properly.
VA will give you suggestions based on content in the file you are editing. If you don't want any VA help at all in XML files, then you can add .xml to the extensions to ignore list at: VA Options | Advanced | Projects | File Handling