The XML in your question is valid.
The problem you are experiencing is because the XMLDoc code you tried expects a file path containing xml whereas you passed in xml string content itself.
As for the solution, please see my sample below which works:
String xmlString = "<test><testcode>1</testcode><testdesc>test1</testdesc></test>";
System.Xml.XmlTextReader reader = new System.Xml.XmlTextReader(new System.IO.StringReader(xmlString));
reader.Read();
System.Data.DataSet ds = new System.Data.DataSet();
ds.ReadXml(reader, System.Data.XmlReadMode.Auto);
UPDATE: sorry I realised afterwards your question is VB:
Dim xmlString As String = "<test><testcode>1</testcode><testdesc>test1</testdesc></test>"
Dim reader As System.Xml.XmlTextReader = New System.Xml.XmlTextReader(New System.IO.StringReader(xmlString))
reader.Read()
Dim ds As System.Data.DataSet = New DataSet
ds.ReadXml(reader, System.Data.XmlReadMode.Auto)