Let's say, for example, a Flash file is loaded. While loading, it retrieves data from an XML file.
If I wanted to change a value in the XML, would it automatically change in the Glash? If not? Is there a method in ActionScript that would allow for this change to occur instantly after the XML file is changed?
When Flash loads in an XML file, it's effectively downloading that data - it's a one-time transaction. If you then change the file, Flash retains the version that it downloaded unless you tell it to download again.
It sounds like what you want to do is a bit more dynamic than a simple XML config file, right? There are ways to make Flash interact directly with a server, even without using an XML dump as an intermediary. Depending on what you need, you might consider looking into something like AMFPHP for flash remoting - this allows flash to call methods directly on the server, and passes back typed objects. For something like this, depending on what data you're passing around you could implement server polling where Flash calls the server once every few seconds to see if there's new data, or something to that effect?
Alternately, if you need an even tighter information flow between server and flash then you might consider setting up a socket connection. Google Flash's native Socket and XMLSocket classes and they may be able to help with what you need. Once you get it set up, you can create a socket on the server that sends data directly into flash at real time. I've not done this for deployed web apps, but I know it's possible. I've used sockets to get Flash to interface with an Arduino board plugged into my local PC etc - but you have a lot of options.
I hope that helps, let me know if you have any questions.