some months ago, Marjorie Burghart started a thread on high quality
printed PDF from TEI XML sources
Well, I don't claim to have an answer, but there was a talk on the DANTE
(acronym for German-speaking TeX user group [liberally translated]) 2011
meeting on this topic: how to typeset TEI XML with ConTeXt.
Slides are in German, but the examples are fairly understandable
The basic idea is automatic processing without having to convert the XML
file to other format than the final PDF output. It is necessary to write
a translation file, so to instruct ConTeXt how to deal with all the XML,
but that is all.
BTW, I haven't gone this way (I don't know TEI or ConTeXt) and I haven't
tried to compile the samples contained in the slides.
Just in case it helps,