I recommend using LINQ to parse your XML, it's much neater.
StreamResourceInfo sri = System.Windows.Application.GetResourceStream(new System.Uri("pack://application:,,,/MediaData/germanDiaIndex.xml"));
XmlTextReader xmlReader = new XmlTextReader(sri.Stream);
is how my app reads an XML file from resources. As you can see, sri.Stream gives you a stream to use to read the data, if you move it to LINQ, I'm sure you can use a stream to do that.