In theory, yes -- but I don't know whether PubMed's format is compatible
with Word 2007's. You might need to convert to a compatible format before it
will work. But, the method would be as follows:
1. Download the .xml file, and convert it if necessary.
2. Create a new blank document.
3. In the References tab, click Manage Sources.
4. Click Browse, and browse to and open the .xml file you downloaded or
converted.
5. Items from the external .xml will appear at the left in the Master List.
Select all of them (or all that you want), and then click Copy -> to copy
them to the Current List window (for the blank document).
At this point, you might need to save/close/exst Word/reopen the Word
document for the rest to work.
6. Open the saved file containing the sources, and click Manage Sources.
7. In the Current List, select all of the sources, then click <-Copy to copy
them to Source.xml (which should be loaded by default; but verify that it's
loaded at the left, rather than the source browsed to earlier).
I've used this method to effectively import sources that were created by
Word 2007 (on different computers). But, haven't had success with .xml files
from 3rd party sources. But, since this was a matter of experimenting rather
than need, I didn't dig very deeply. Sources such as
http://www.scripps.edu/~cdputnam/software/bibutils/ might have the needed
utilities to convert... but I haven't delved, so I can't say.