So last night I was poking around in the Loki folder on my HD and found out that the .xmd are UTF-8 encoded .xml files, and thought... maybe there's a decryptor for this? Googled it and sure enough if the first result wasn't just a decryptor, but one specifically for Loki.
Back up the files in your "Characters/(Character Name)" folder and then decrypt the ones you want to edit and delete the .xmd's. Open the file in either an xml editor or notepad. If using notepad it's gonna be a little difficult as the info is all jumbled but atleast it's readable and editable now. You can always use Internet Explorer to view the XML files "properly" then search for what you want to edit in notepad once you find out what it is.
You can edit your inventory (I would only mess around with quantity of things like potions and materials (search for "matiere"), and can edit things in your character files like xp earned, level, faith points, total points in each deity, stats, etc.
Just leave the .xml file as it is after editing and saving. The game will read the .xml and encrypt it back to .xmd after saving.
I found the file and I understand how is it suppose to work. However when I extract the .rar file the .exe. pops up for about 15 seconds and then goes away. I noticed that the McAfee virus scan was picking it up as a backdoor so I also got the "clean" version AND disabled McAfee. I am still getting the same result. It will extract, give me a small nugget of hope by showing me the .exe file, and then when I try to move it to the character file, it kicks the chair out from under me again . I was just wondering if you had any suggestions or a copy of the file that is not .rar that I could try. I know this is a throwback and the game is old but I wanted to revisit some older games for replayability.