Doing this would move your application from web based to windows based. Think of WPF as winforms.
If you want to keep this application web based, you could look at silverlight, its a subset of WPF.
I wouldnt change your storage layer from SQL to XML if the app is data driven. Otherwise your going to have to handle concurrency, file locking etc which SQL server does for you by default (row locking etc) Ie, if there is lots of writing / updating of data SQL server is a much cleaner option than XML. In this context, think of XML more of a language independent way of passing data around, and storing simple data structures that are primarily read only.
If this is a graduation project, perhaps focus instead on design methodologies, MVC, or MVVM if you do choose Silverlight. A plus for potential employers and plenty of depth for a dissertation.
Edit - id argue XML would be a more expensive data layer! For the reasons above its going to be more complex and therefore greater dev time. Additioanlly SQL server express is free and the advanced edition with full text search and SSRS is also free; we have loads of clients that use it.
Edit 2 - another option would be to use Flex. It would be a completely independent tech on the presentation layer (and from a Uni point of view this could be good as you may loose marks / not even be allowed to use stuff from a previous project) Then you could use a combo of XML and JSON to pass data between the Flex layer and .NET on the server. Just another thought for you!