Yes, it is possible to bind with XML or DataTable.

I added a WebMethod called GetCustomers to my WebService sample.

[WebMethod]
public object GetCustomers()
{
    DataTable dt = new DataTable();
    dt.Columns.Add("ContactTitle", Type.GetType("System.String"));
    dt.Columns.Add("CustomerID", Type.GetType("System.String"));
    dt.Columns.Add("ContactName", Type.GetType("System.String"));
    dt.Rows.Add(new object[] { "Owner", "ALFKI", "Maria" });
    dt.Rows.Add(new object[] { "owner", "ANATR", "Ana" });
    dt.Rows.Add(new object[] { "oWner", "ANTON", "Antonio" });
    dt.Rows.Add(new object[] { "Sales Representative", "AROUT", "Thomas" });
    dt.Rows.Add(new object[] { "Sales Manager", "BERGS", "Christina" });
    dt.Rows.Add(new object[] { "Sales manager", "BLAUS", "Hanna" });
    IList<Class1> items = dt.AsEnumerable().Select(row =>
        new Class1
        {
            title = row.Field<string>("ContactTitle"),
            id = row.Field<string>("CustomerID"),
            name = row.Field<string>("ContactName")
        }).ToList();
    return items;
}

Where the Class1 is defined as follow.

class Class1
{
    public string title;
    public string id;
    public string name;
}

I can show the Customers in WebGrid by using the following snippet code.

<ISWebGrid:WebGrid ID="WebGrid1" runat="server" Height="600px"
    RenderingMode="HTML5" Width="800px" BindingOperationMode="ClientBinding"
    ViewStateStorage="None" StateRestorationLevel="Low" UseDefaultStyle="True">
    <RootTable>
        <Columns>
            <ISWebGrid:WebGridColumn Caption="Contact Title" DataMember="title"
                Name="ContactTitle" Width="200px" CaseSensitiveGrouping="No" />
            <ISWebGrid:WebGridColumn Caption="Customer ID" DataMember="id"
                Name="CustomerID" Width="100px" />
            <ISWebGrid:WebGridColumn Caption="Contact Name" DataMember="name"
                Name="ContactName" Width="100px" />
        </Columns>
    </RootTable>
    <ClientBindingSettings DataSourceType="WebService"
        ServiceUrl="WebServiceforClientBinding.asmx">
        <ServiceMethods SelectMethod="GetCustomers" />
    </ClientBindingSettings>
</ISWebGrid:WebGrid>

Hope this helps.

Thanks, In this case, whats the ItemTypeName value should be ?

In my opinion, The ItemTypeName value should be Class1.

Hope this helps.