What is happening is you set a variable "c2transitionType" to "fade" in the top of your cycle2_script file. Then, you load the XML file and overwrite the value with a blank value. If you look at your xml file, you should really put some values for the all of the nodes:
http://74.81.196.208/carolinescoffee2010/sliders/cycle/cycle2/cycle2_params.php(you may need to view source to see the xml code, depending on the browser you are using).
In my honest opinion, just get rid of the whole XML file stuff. You don't really need it unless you plan on changing the slider settings on the fly.
If you decide to keep it, then start off by duplicating the settings to your XML file