From what I understand from this : https://bugs.eclipse.org/bugs/show_bug.cgi?id=561415, the source tab editor is configurable.
I have found no documentation on how to configure it.
Right now, it defaults to eclipse "stuctured text editor" which lacks decent XML support. I have installed WTP xml editor plugin
How can I configure m2e to use it?
Not possible as of v2.0.1 as per @howlger comment.