I may be misunderstanding your steps, but I think you may be missing some steps.
Once you have the report in report writer in the modified version you like, then you should go to
Reports>Template Maintenance
For the field Report Name, use the drop down arrow and if you have never been to this screen, select More Reports and choose the report you want to use which should be the one you finished modifying in report writer (I am assuming the report you modified in report writer is a report that GP allows as a Word Template).
At this piont, you need to click on New which will open a new window called New Template
Click on the radio button From Existing Template and choose the one presented. At the bottom of the screen is the field New Template Name. Change the name to what you want. Click Create which will take you back to the Report Template Maintenance window.
Click on the new report you named/created, then click on the button Modify.
This will open up the Word template. You now have access to all the fields you want to use from the modified report and can begin modifying the Word template.
Once you have finished modifying the word template, then save it (keep the name the same) somewhere on your computer or on a network drive.
Go back to the GP window Report Template Maintenance, highlight the report name and click on the green + symbol which will open the window Add Template.... and you go to the location you saved the word template and choose it and hit Open. This will now override the Word Template with the modifications you made.
You now can assign the template to a company by going to Assign.
If you prefer to watch all the steps, a company has posted on Youtube how to do it (I think in 5 parts).
From my view, the only time you need to be exporting to xml is when you are already using the Word template, but then have to modify the report writer report. This will cause the report writer and Word template to be out of sync. To sync them, you can watch the following youtube video to see what to do.