The idea of having the template specification be stored as something more human-readable, and possibly more like wiki-text, certainly has its appeal (at least, to those people who don't want wiki-text to be replaced by XML in the first place!) It would be easier for users to create and edit; unless there were a tool to edit the XML, and users always used that tool... I really don't know whether XML or something simpler would be the better solution in the long run.
I do believe, though, that the thing that prevents a simpler storage format is the need for translation. Without it, a template parameter can be defined by a simple set of values: a label, a description, an input type, and then a handful of modifiers for the input type (like the list of allowed values, if it's a radiobutton or dropdown). If translation of different values is allowed, though, you really need the structure that XML provides, or else the whole thing devolves into chaos.
Most wikis won't require translation, though; and that includes most Wikimedia projects - they're in one language at a time. The one big exception is Wikimedia Commons, which also happens to be the proposed first usage of this template-call-editing system. And for that site, translation really is necessary (I think).
So, at the risk of complicating things even further - maybe it makes sense to have a split approach - one format that handles translation, another that doesn't? The non-translation format, given that it would be simpler, could even be embedded directly in the template - possibly within a <documentation> tag in the template, as Platonides suggested. I put together some ideas on how this could work, here:
http://usability.wikimedia.org/wiki/Template_forms#Specification_structure
-Yaron