This article http://blogs.msdn.com/tess/archive/2006/02/15/532804.aspx by Tess Ferrandez outlines why using XMLSerialization can cause memory leaks.
The leak is a result of how the objects are instantiated in memory as assemblies, not objects so are not targeted by the Garbage Collector.
The article was originally written on the 1.0/1.1 CLR, but the updates are unclear about the 2.0 CLR.
I'm using XMLSerialization/Deserialization extensively in a web app still in beta for UI/server exchanges. The objects are just DTOs (objects with only properties).
Thank you in advance!