No need for XML literal wrapper
There is no need for the concept of a forged rdf-wrapper. Just as the integer 5 does not have to be "wrapped" to be a value, the nodeset corresponding to an XML literal should not have to be wrapped. It is just a value. Or else you could think of them as graph nodes with identity. Either model is better than forging a string context for data that is necessarily already parsed by the time it is interpreted.
See: http://lists.w3.org/Archives/Public/www-rdf-comments/2002OctDec/0109.html
The XML literal wrapper is not needed.
See: http://lists.w3.org/Archives/Public/www-rdf-comments/2002OctDec/0129.html
Comment may be true, but if so help is needed to find more appropriate solution.
See: http://lists.w3.org/Archives/Public/www-rdf-comments/2002OctDec/0131.html
Further input following Jeremy's response, indicating that the current approach is problematic from an XML perspective.
See: http://www.w3.org/TR/2002/WD-rdf-concepts-20021108/#section-XMLLiteral
This is ugly, but not a fatal flaw. This may be an issue for the WG to reconsider later.