It's common for both the producer of XML and the consumer of XML for any given application to be using a dramatically smaller subset of the standard. Well-engineered software is intentional about this and documents those limitations. Under these conditions it's perfectly valid to use a library that only supports this subset.

Furthermore, those subsets have natural "fault lines", influenced by the burden:utility ratio. This makes consumers and producers naturally coordinate on a subset. It's not like another commenter here said about everyone needing different features.

My argument is therefore that there is value in having different libraries for different subsets - with the smallest subset being much simpler than libxml2.