Database design issue

hi,
we are designing a web application for defect tracking. In this for each
project the user can choose his own template for writing testcases... we nee
d
to persist this data.As you can see there can be any number of textbox in
that template.
We suggested two models,
1. a table with a text column holding the XML format which contains the
template with data .
2. a table containing variable name and value as column such that a crosstab
query would return the template values for a particular project.
But the .net developers suggest creating the table on the fly while the
template is chosen.. Please note once a template is chosen for the project i
t
remains the same.
which one would be better?If you are not going to query within the template and get a subset of
testcases.you can use the XML method.But we don't have validation techniques
for the XML schema in SQL 2000. So if that's not a problem, then storing as
XML should be the best option.
But if you have cases like, the user will select testcase 5 in the template
and edit it and save it, then you are better off with the second option
because manipulation of XML is tough.
In case of option 1, You can take out the XML and edit it and replace the
old one with the new one. If thats fine, then go for option 1.
Hope this helps.