The game only loads the XML file at start up. So if you make changes to the XML file, then yes indeed you have to restart the game, if you really want to look how it works out in the game. Though LOTRO skin viewer (amongst the developer downloads here) can help you a bit, if you're still constructing your code.
For the images though, if you have replaced an image (new art, adjustments, whatever) and you haven't changed the XML code, you can simply reload the skin by choosing a different one or none, and then change it back to your skin. This will force the game to load all the images again.
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