That's a good question. The XML files are parsed at start up and this is when the observer/subject relationships are created. In the example you provided, the XML file is defining an object called "Ball." This object has properties in the Graphics and PhysicsCollision system. When the XML file is parsed, an object will be created in SystemGraphics (ObjectMesh.cpp) and an object will be created in SystemPhysicsCollisionHavok (ObjectPhysics.cpp). If you look at these cpp files you will see two methods called GetPotentialSystemChanges and GetDesiredSystemChanges. GetPotentialSystemChanges lists all the changes this object will make and GetDesiredSystemChanges lists all the changes this object wants to know about. So, when these objects are created, the Change Control Manager calls these functions to determine which data might be propagated. For example, the ObjectPhysics says it will change position and ObjectMesh says it wants to know about position changes. When ObjectPhysics posts a position change, the Change Control Manager knows to tell the ObjectMesh about it.

I hope this helps.
Let me know if you have any further questions.
Thanks,
Orion