Thanks for your replies with regards to this subject.
It is all starting to make some sense now. If I understand correctly then, the C++ module generates an in-memory texture that the xml files reference for displaying within the OSG tree. This texture is being continually re-generated to provide a 'dynamic texture'!
Can I assume that this this is the standard way to generate dynamic graphical information on screen?
Essentially what I am looking to do is create some instruments of my own with some detailed generation of graphical entities that are being continually updated. I am therefore assuming that a 'dynamic texture' is the way to go with this. If there is another way, perhaps better, then I am open to suggestions!