how to implement file checksum ?

You can create the file, then calculate the sum (for example getting the hash of the whole file string or only a part of it which is important) and save the check sum at the end of the file. When you read it, you can read the whole file, get the check sum that was saved inside it and then calculate again the checksum for the rest of the file (so the real contents, which was also secured when the file was saved). Then compare the check sums.

Instead of calculating a check sum, you can use a more advanced method, like sign the data. For more info have a look at:

http://msdn.microsoft.com/library/default.asp?url=/library/en-us/cpguide/html/cpconCryptographicServices.asp
http://msdn.microsoft.com/library/default.asp?url=/library/en-us/cpref/html/frlrfsystemsecuritycryptographydsaclasstopic.asp

I like using MD5 for my checksums.

            MD5 pMD5 = new MD5CryptoServiceProvider( );
            byte[] resultHash = pMD5.ComputeHash( Encoding.ASCII.GetBytes( response ));
            string resultMD5 = Convert.ToBase64String( resultHash );

Note that using MD5 you can create a hash but you cannot sign it, so everybody can create the hash after signing the file

If all he is doing is making sure no one has edited the file, then the checksum idea is sound.  His biggest problem is that he wants to include the checksum inside the xml which invariably changes the checksum of the file.

Yep. Yer right.  I'm still pre-Diet Pepsi and not fully awake yet.

:-))