http://www.php.net/manual/function.xml-set-object.php
says:
"
xml_set_object
(PHP 4 >= 4.0b4)
xml_set_object -- Use XML Parser within an object
Description
void xml_set_object (int parser, object &object)
This function allows to use parser inside object. ..."
among other things. In short, the php manual indicates that the function is still in use. I've been using it (I started using php with v. 4RC1) so I know it is.
I don't know why you get that error. Are you sure you spelled it correctly? Perhaps post the code so people could try it on their machines?