I have tried both options, neither have worked.
The first, "Import from file" gives me the error: BlogReader.Import: Object reference not set to an instance of an object.
The second "Import with click-once" either does nothing or says the specified URL does not exist. I made sure to try it in IE (tried IE8 and IE9). This option is also somewhat unintuituve.
I am happy to send you the XML file. Where should I send it to?