Try this...
Declare @idoc int, @doc varchar(1000)
Set @doc ='<row LocationCode=\"8606\" City=\"Falls City\" State=\"TX\" />'
Set @doc =Replace(@doc,'\','')
EXEC sp_xml_preparedocument @idoc OUTPUT, @doc;
SELECT * FROM OPENXML (@idoc, '/row',1) WITH (LocationCode varchar(10),City varchar(40),State Varchar(40));
Output:
LocationCode City State
8606 Falls City TX