Custom pipelines can be overkill as per instance configuration allows you to change the pipeline component properties without rebuilding your application. Although this is not available with Biztalk 2004.
In fact I usually build a project with a Flat File Receive pipeline and Flat File Send pipeline and deploy these in a common application that can be shared. When needed I use my standard FF Receive pipeline and specify the DocumentSpec via the Admin Console.
The Xml Receive pipeline contains the Xml Disassebler. This identifies the message type, using root node name and namespace from the incoming message and matches this to a deployed schema. If the schema is an envelope it will debatch the message and propagate the child messages. It uses the schema to determine which properties to promote and distinguished fields to write to the message context. it can also validate the message against the schema if you turn this option on.
The XmlTransmit pipeline contains the Xml Assembler. This is required if you are using envelopes and need to wrap a message in an envelope. You can’t aggregate child messages into an envelope, only a single message so this function is not used much.
You also need the XmlTransmit pipeline if you wish to demote property values back into the message you are sending.
You can also mess around with processing instructions in the Xml document, – you might need this with InfoPath forms which rely on processing instructions.