As said before, you can escape the < by using &lt; or you can use CDATA sections:

<sourcetype>
  <name>G1</name>
  <desc>group 1 to decode</desc>
  <rules>
    <rule><![CDATA[['^\d(.)','14']]]></rule>
    <rule><![CDATA[['^(<xyz>)']]]></rule>
    <rule><![CDATA[['^(</xyz>)']]]></rule>
  </rules>
</sourcetype>
[download]

That's still ugly, but a little easier to read than the version with &lt;, and at least you can cut and paste code in the rule elements.

The <![CDATA[...]]> construct prevents everything in the section from being parsed as XML. You still need it to be valid text (unicode by default) and not to include ]]>, but anything else is fine.