That is very hard to do with Biztalk 2004. I have tried to do exactly what you wanted with no luck.
You might want to try writing the flat file to the file system. Then, having another process picks it up using the pass through pipeline. Then, receive it as a message of type XmlDocument (it works – kind of strange through) and then pass that to the web service.
You can do this in 2006 – but that doesn’t help you now.