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No, XML itself does not replace HTML: instead, it provides an alternative by allowing you to define your own set of markup elements. It actually complement HTML nicely.
HTML is expected to remain in common use for some time to come, and DTDs will be available in XML versions as well as the original SGML versions. XML is designed to make the writing of DTDs much simpler than with full SGML.
If you want to learn more, you can read the article: XML - What's in it for us?, where this question is debated.