In answer to your question: yes.
Now that you've edited your question...
You'll want to parse the XML, preferably using the libraries that ship with .NET. Then you walk the XML tree, executing each node that has some action associated with it.
You probably don't want to expose your app's variables directly. Instead, you should define some execution state that can be manipulated by the XML file. You could have, for example, a dictionary of variables and their values. Then when you get an <action>
tag, you look at the var
attribute, look up the variable in the dictionary, then change the value to be whatever the contents of the tag specify.
This is not a simple task. It's not necessarily hard to write a language interpreter (which is what you are doing, essentially). But it can be difficult to design your language so that it makes sense. You'll also find that, if you have embedded expressions (which you appear to), then you'll need an expression parser. Again, these are "easy" to construct, but for someone without experience, you'll need to do some research first. You could easily end up constructing something that's very complicated, slow and broken if you don't know about real world parsing techniques.
For expression parsing, look into LL(1) parsers, specifically recursive descent, which is the easiest to understand and implement.
For evaluating the XML input, you'll need a recursive algorithm that walks the tree. This will be similar to your recursive descent parser. In fact, the two are pretty much the same except for the details.
Once you've gotten something going, you should ask an actual question about a particular problem, instead of asking one so broad.
Another edit: use a dictionary for your variables.