You many need to set the Content-Type header on your Web Service invoke activity to tell it you are sending text/xml in the body. You can set the HTTP headers in the Map Inputs if you right click on the To Activity side of the mapping and select "Show Optional Parameters"
Please verify the namespace of input xml string and the xsd used in ReadXML activity. ReadXML will give you false positive even if you use a different namespace. See whether the input to WebService Invoke activity is properly populated in runtime.
Also please check whether the target webservice sending proper response back to CI or not. Cast Iron expect xml response from webservice but it may receive html/string response. This will also cause above issue.