hannah, if I recall correctly I simply left the separate XML files on my local HD and then browsed for them when prompted by the import process.
As for the XML, that is a bit tricky. Even if Dreamweaver doesn't like the XML file, the importer should be able to handle it. I don't recall the content being as much of an issue as the other things (dates, permalinks, size of files).
FWIW, my situation is decidedly different that most, as my main site is for photography; my 600-ish posts have nearly 4000 pieces of media that all are treated as separate posts. In the end, I have abandoned trying to use this plugin, instead opting for simply exporting the SQL through phpMyAdmin, then using a text editor to break the larger files down, and then importing the SQL into the target WordPress' database. As I'm hosting through bluehost, I used their file manager to move the contents from one place to another; this could just as easily be done by zipping up the upload folder and using an FTP utility to move it somewhere else and then unzipping it.