Hi KK.. Sorry I didnot mentioned before I have tried just the way you explained above by removing template tags ..but it dint work .. I also tested your code now.. even that creating the same loop..
The server must be serving the cached version, I think.
Login as admin and then access the sitemap in the same browser. If it works (admin are never served cached data) destroy the cache by making some dummy changes to any of your page's content in the admin-panel (edit some content, save page, edit back to the original and save).
Does this work? If not, please PM me your site's FTP/Couch creds please.