Rick:
You are exactly correct. The file created by TAGSETS.EXCELXP is a Microsoft Office Spreadsheet Markup Language XML file that conforms to the Office 2002/2003 specification for XML description of a workbook/spreadsheet.
When someone uses .XLS as a file extension in an ODS TAGSETS.EXCELXP program, it is merely a convenience -- so Windows will launch Excel when they double click on a file with .XLS, Excel launches (instead of the browser, which is the default file open program for an XML file).
ODS TAGSETS.EXCELXP does NOT create a "true, binary" .XLS file -- so your advice to open the file in Excel and do a SAVE AS -->XLS (not just a SAVE -- which will save to XML format) -- was good advice. It is the only way to ensure that the file is a binary .XLS file.
(Also, if someone has Office 2007 and saves to the new .XLSX format, they can only read that file format with SAS using SAS 9.2 Phase 2 and Proc Import or the Excel Libname Engine).
cynthia