Yes you can use DML to rename an element by snipping it at the node you want renamed, injecting a new node at that element and then pasting the snipped elements back into the xml at that node. Ive done a SQL fiddle to demo. http://sqlfiddle.com/#!3/dc64d/1 This will change
<animal species="Mouse">
<legs>
<leg>Front Right</leg>
<leg>Front Left</leg>
<leg>Back Right</leg>
<leg>Back Left</leg>
</legs>
</animal>
into
<animal species="Mouse">
<armsandlegs>
<leg>Front Right</leg>
<leg>Front Left</leg>
<leg>Back Right</leg>
<leg>Back Left</leg>
</armsandlegs>
</animal>
SqlFiddle looks to have long since broken my solution. From memory ive pasted the basis of my solution below...
DECLARE @XML2 xml
DECLARE @XML3 xml = '<limbs></limbs>'
DECLARE @XML xml =
'<animal species="Mouse">
<legs>
<leg>Front Right</leg>
<leg>Front Left</leg>
<leg>Back Right</leg>
<leg>Back Left</leg>
</legs>
</animal>'
SET @XML2 = @XML.query('animal/legs/*')
SET @XML.modify('
insert
(sql:variable("@XML3"))
after
(/animal/legs)[1]
')
SET @XML.modify('
delete (/animal/legs[1])
')
SET @XML.modify('
insert
(sql:variable("@XML2"))
as last into
(/animal/limbs)[1]
')
select @XML