I'm using .NET 2.0 with C# and I want to find out about DataSet's and
performance. Basically, I have a "table" with 5 columns, and no more
then 100 characters of data to be stored in each, and possibly over
500K records. The datatable should be saved locally in an xml file.

I want to know how to bind this to a form. Load it from an xml file,
and make incremental changes (insert a row) without resaving the
entire dataset. (this is the most important part) Also, if it will
help performance and save space on the hard drive, please include a
way to get rid of the extra white space.

Ok, if I'm understanding this correctly.  You have an database table
that you pull your data from into a dataset.  And then you would like
to save the dataset into an XML file, from the XML you want to bind
this to a 'form'.  Once this form has been bound you would like to
make changes but do not want to alter (save) the XML file correct.  If
you can provide a little more info I'm positive I can help.  I've been
developing in .net since beta (the good ol fun days).  I hope you
figure it out!