When creating a new menu using Drupal 7.10 and XML sitemap 7.x-2.0-rc1, I expand the XML SITEMAP fieldset found on admin/structure/menu/add to find the Inclusion preference set to "Include" by default. Making no changes, leaving "Included" as the selected option, I save my new menu. If I go back in to edit the newly created menu I find the Inclusion preference is actually "Excluded", not "Included". Change the value back to "Included" and saving the updated fixes the problem.