When you click on "DataSource" under Data Sources, you'll notice that the top line displayed is URL. It is assumed that the DataSource you'll be using is on the web somewhere (there's a way to maintain the datasource locally on the iphone but I'll get to that in a minute). So, "publish" you xml|rss|atom|etc. data on a web site somewhere and enter the appropriate URL. When you press return or hit the refresh arrow, if the URL is correct, DashCode will parse your data file and the DataSource and List items will reflect your xml structure).
Then using DashCode create the bindings between your data and your DashCode template.... I whiz right by this because there is an excellent tutorial at the apple developer website at: http://developer.apple.com/safari/library/documentation/AppleApplications/Conceptual/Dashcode_UserGuide/Contents/Resources/en.lproj/Introduction/Introduction.html#//apple_ref/doc/uid/TP40004692-CH1-SW1
If the above link fails, go to "developer.apple.com" and from that home page search for "DashCode". The intro document should be the first link returned.
This intro walks you through writing DashCode applications including working with DataSources and binding to your templates.