Hey Mike,
Nice to hear that the “custom Xilinx Zynq based board” is still going 
Defusedxml is a python package that was added to facilitate adding security to ROS, as it provides protection against a bunch of different XML attacks. This is part of the SROS effort to add some security and hardening to ROS.
Anyway to get roscore to run, have you tried adding python-defusedxml as a dependency here: https://github.com/bulwahn/meta-ros/blob/kinetic-experimental/recipes-ros/ros-comm/roslaunch_1.12.2.bb#L18
I have only done some looking around at OpenEmbeded stuff, and never got around to actually using it so I am not sure if this is the ‘right’ way to fix this, or if it would even work.
Out of curiosity what is the size of the image that comes out the build process? I would think it would quite small relative to a Ubuntu image.
Rohan