Apologies if this isn't the right place for this question but...
With shared hosting providers e.g. http://www.discountasp.net/ will my Asp.Net web application have permissions to write/create text (xml) files within the web root?
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Your asp.net web app should be able to.
Just look for a provider that allows you to change folder permissions. My provider allows me to do it right through the file manager.