The script works fine if I point it to a XML file on my localhost but using 'php://input' it doesn't seem to grabbing anything.
Why would you expect php://input to "grab anything"? You can use php://input only to read from the standard input if PHP is being run from the command line or to fetch the request data (e.g. POST or PUT HTTP request data), except for a multipart POST.
Without seeing the code above that point, I'd suggest that you dump the output straight out and see if you're actually receiving the XML. I doubt the problem is with your parsing, but with receiving the postback. Looking at the ultracart documentation, it looks to me like they aren't passing the the body of the xml in as a post parameter, but probably as an HTTP PUT which is fairly whacky.
http://php.net/manual/en/features.file-upload.put-method.php
I'd wager on most shared hosting etc, PUT support is pretty limited or not supported by default. I'd look there first.
Josh