I've been reading xna only supports zune to zune.  Also, "Networking APIs on Zune do not support Internet connectivity".

I need to develop a game where zunes are clients and talks to a central server to get player coordinates.

is there a work around this so i can download from a url and maybe parse an xml file on a pc acting as a server?  Or is the only way one zune acts like a server and all the zune query that. 

I assume i won't have this problem in xna 4.0 since zune HD has a browser and the next xna should have internet connectivity.

Currently there is no way to do what you're asking. As to the future of what will be possible, none of us know yet. No mention has been made as to what updates there will be to the Zune XNA API (if any).