Finally, XMLReader made it into the standard PHP distribution for the upcoming 5.1. No more fiddling with pecl (which works fine, btw ;) ), if you want XMLReader built in. It's not enabled by default, but it's in the sources and doesn't have more dependencies than DOM or SimpleXML (that is libxml2 2.6.x).
Documentation is a little bit sparse right now, but see my slides, my posts about Processing Large XML Documents (plus Update), the xmlreader interface tutorial from xmlsoft.org (this is for the C API, but the PHP API is very close and a good introduction into the general idea of xmlreader) or just look at the sources and search for {{{ proto (generally a good idea, if documentation is missing for an extension).
If you're still stuck in ext/xml aka SAX world, it's definitively worth giving a try (and it works also for PHP 5.0, if you install it from pecl).
Update: Rob's working on real documentation.