Xml saving questions

[nerdinator]

I am planning to save files using xml writing as an alternative to MFC serialization.
I want my application to use xml file writing and reading.
I am using ofstream and ifstream for this.
Lets say my application files are have a format .xyz

So,the main problems I am facing are:
1.To what .xml file should I save the data of my .xyz file of my app,and where should it be located?
I use OnSaveDocument to write the saving part of the code.
I can get the directory of the file being saved from the parameter,
LPCTSTR lpszPathName.
But what directory should I give ofstream to open the xml file?
Like,

BOOL CMySoftDoc::OnSaveDocument(LPCTSTR lpszPathName)
{
ofstream x;
x.open(What???);
}

2.Won't this create an xml file for each .xyz file created?
Like a 2 file system?
If yes,how do I avoid it?
Though I am using xml file saving,is it possible that I update the size of the .xyz file as well and keep that as the only file and not use a separate xml file stored elsewhere keeping track of all the changes made to the .xyz file?

If I am not clear,tell me what you didn't get.:)
Thank You.