After a bit of struggle i am able to use inline xml. Here is my two cents. Thanks for the_bagbournes for his help. 
Code:
/*
* Ext JS Library 2.0.2
* Copyright(c) 2006-2008, Ext JS, LLC.
* licensing@extjs.com
*
* http://extjs.com/license
*/
Ext.onReady(function(){
var xmlstr = "<Items>"+
"<TotalResults>203</TotalResults>"+
"<TotalPages>21</TotalPages>"+
"<Item>"+
"<ASIN>0446355453</ASIN>"+
"<ItemAttributes>"+
"<Author>Sidney Sheldon</Author>"+
"<Manufacturer>Warner Books</Manufacturer>"+
"<ProductGroup>Book</ProductGroup>"+
"<Title>Master of the Game</Title>"+
"</ItemAttributes>"+
"</Item>"+
"<Item>"+
"<ASIN>0446613657</ASIN>"+
"<ItemAttributes>"+
"<Author>Sidney Sheldon</Author>"+
"<Manufacturer>Warner Books</Manufacturer>"+
"<ProductGroup>Book</ProductGroup>"+
"<Title>Are You Afraid of the Dark?</Title>"+
"</ItemAttributes>"+
"</Item>"+
"</Items>";
var doc;
if (window.ActiveXObject) {
var doc = new ActiveXObject("Microsoft.XMLDOM");
doc.async = "false";
doc.loadXML(xmlstr);
}
else {
var doc = new DOMParser().parseFromString(xmlstr,"text/xml");
}
var xmlReader = new Ext.data.XmlReader({
// records will have an "Item" tag
record: 'Item',
id: 'ASIN',
totalRecords: '@total'
}, [
// set up the fields mapping into the xml doc
// The first needs mapping, the others are very basic
{name: 'Author', mapping: 'ItemAttributes > Author'},
'Title', 'Manufacturer', 'ProductGroup'
]);
var store = new Ext.data.Store({
proxy: new Ext.data.MemoryProxy(doc),
reader: xmlReader
});
var grid = new Ext.grid.GridPanel({
store: store,
columns: [
{header: "Author", width: 120, dataIndex: 'Author', sortable: true},
{header: "Title", width: 180, dataIndex: 'Title', sortable: true},
{header: "Manufacturer", width: 115, dataIndex: 'Manufacturer', sortable: true},
{header: "Product Group", width: 100, dataIndex: 'ProductGroup', sortable: true}
],
renderTo:'example-grid',
width:540,
height:200
});
store.load();
});
Jaweed sarfraz