I'm interested in changing pretty much the entire combat system, unit by unit, upgrade by upgrade, algorithm by algorithm. To what? Something very similar to Civilization 2. Is this possible with just XML and python or do I need the SDK whenever it is released?

That sounds like an SDK thing. You may be able to simulate something like it by redoing all the XML though. Either way, it's going to take a LOT of work.

Well, my main quelm is the single statistic. It puts too much emphasis on percentages and sheer luck with dice rolls (then again, I'm used to strategizing with the older systems. Maybe I just need to adjust... or maybe I just need to mod! haha!)

The combat model is controlled in the SDK. We have to wait till Jan for that one. :)