Well, it depends on the complexity of the text file you’re going to use. As for XML’s readability? I can read it fine, and if you know what the intent of the tags are, a lot of it becomes clear. It’s a very context based thing.
If you’re at all planning on allowing anyone else to edit the files without the use of a program (Like a quest/content creator), then using another format probably isn’t going to work so well. Since you will have to define your own rules about how the file will be read into your system (What the use of \n, \r, \t, and other characters mean), you’ll have to make these rules available to others. And, if you decide that you need to add in another piece of data, your whole format is probably going to change. XML is fairly easy to change (Add tags to), and reading it doesn’t change too much when you do so.
So, a lot ends up depending on how set your data format will be. If you think you have everything you need to store your quest/other data and that you don’t want other people poking around inside of the text files, then using some sort of plain text parser could be easier than attempting to define a whole XML document. If you think that you might need to add/remove/change things later in the development process or that you want to allow people to add/remove quests by editing the text document directly, then XML is probably better for you.