Yes, there is no need if you really need only simple tree structure. If you need things like categories (i.e same note belong to multiple categories) or more sortable attributes then you must maintain the structure somewhere and xml might be good for this. But yes, using sqlite may be better then so why to use files. I only mentioned xml as index because it is incremental change to current design.

As for confusing the users I don't think it will be worse or that it matters. Even single XML has a little use for non-programmer. As for the backups it is not much harder to backup directory than backup the file. And you can integrate your data into maemo backup applet anyway for normal users.