Yes, we support XML. I'm sot sure about your second question because we don't have any .NET developers (we are administrators). I recommend you signup for a trial account and test it yourself. We could make any adjustment in settings as long as it doesn't compromise security
A web service isn't any different than a web page in may ways. It accepts a client's command and returns a result. It even works on port 80 i believe. I believe JodoHost would handle this just fine.
I have not written any web services and placed on JodoHost or user any web services from an app on JodoHost, but I have pulled down XML data from an outside source from my app on JodoHost (like rss news feed info).