As soon as you define your XML namespace used in the XML elements, you can easily import this - no problem.
You need to have your XML look something like this:
<Catalog xmlns:dt="some-xml-namespace-here">
<Rec>
<ITEM dt:dt="string"/>
<QTY dt:dt="string">1</QTY>
<SUB dt:dt="string">1</SUB>
<CATALOG dt:dt="string">ABC123</CATALOG>
</Rec>
.....
</Catalog>
After I do this, your two lines of code work like a charm and the data gets imported, no problem (into 5 tables inside the Dataset.