Thank you for the responses. With that additional information I was able to fix the project to work (so far!) The changed rebel.xml file looks like this:
<?xml version="1.0" encoding="UTF-8"?>
<application xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance" xmlns="http://www.zeroturnaround.com" xsi:schemaLocation="http://www.zeroturnaround.com http://www.zeroturnaround.com/alderaan/rebel-2_0.xsd">
<classpath>
<dir name="C:/work/hg/team/appname/mymodule/target/classes">
</dir>
</classpath>
<web>
<link target="/">
<!-- Get everything BUT the XML files from here -->
<dir name="C:/work/hg/team/appname/mymodule/webapp">
<exclude name="**/*.xml" />
</dir>
<!-- Get ONLY the processed XML files from here -->
<dir name="C:/work/hg/team/appname/mymodule/target/webapp">
<include name="**/*.xml" />
</dir>
</link>
</web>