Amazing. 8.5 years later and I finally see some interest in the problem.
I was eventually able to disassemble the case and fix the problem. See photos at:
http://www.learnbydestroying.com/jeffl/pics/repair/APC%20XS-1300/index.html
I don't recall exactly what I did to disassemble the case, but the photos should help. The basic idea is to remove the screws and locking tabs as shown by the red circles and red arrows. I have two or three of these also in need of repair that I can take apart and make some better photos if anyone is interested.
The failure to charge the batteries was caused by a defective 22uf 400v electrolytic capacitor (C69) as shown at:
http://www.learnbydestroying.com/jeffl/pics/repair/APC%20XS-1300/index.html#XS-1300-03.jpg
I didn't have an exact replacement capacitor handy, so the capacitor on the PCB is in a smaller package.
In the past 8.5 years, I've repaired about 10 APC XS-1300 UPS's by replacing C69. Unfortunately, the initial 3 UPS's came back with the same charging problem and the same bulging capacitor problem. Apparently, my replacement capacitor was no better than the original failed capacitor. I don't recall exactly what capacitor eventually worked, but I did recall it came from Panasonic. I can dig out the details if anyone is interested.
The failure to charge problem is rather irritating because most of my customers assumed that the battery had died and purchased replacement batteries, which did the same thing and refused to charge. Actually, both the original and the replacement batteries died rather rapidly because gel-cell and AGM batteries don't like to remain in the discharged state for very long.
I do not believe that the problem is caused by a defective capacitor. Rather, I believe it might be a design problem where there is too much ripple current going through the capacitor causing it to get hot and shorten its useful life. I haven't done anything to investigate this possibility so please consider this pure speculation. If I had a schematic, I would probably make whatever changes are necessary to reduce the ripple current. I'll spare you my rant about manufacturers who fail to supply repair information and replacement parts.