I Was Wrong
It happens.
It turns out that libxml2 supports something pretty similar to what I had in mind. Instead of providing the SAX parser with a get-more-input-data callback, it has a "push" mechanism whereby one gives it data as it becomes available instead of buffering and providing data as the parser requires it. Same result. Wrap that all in a nice set of Objective-C classes to hide the messy details of the HTTP request and all of the libxml2 callbacks, and its all quite beautiful.
So, now, when you load up an RSS feed in my iPhone app, the stories appear as the XML is downloaded, instead of waiting for the entirety of the XML.
Tada!