Memory Leak using StreamReader and XmlSerializer

The leak is here:

new XmlSerializer(typeof(XMLObj), new XmlRootAttribute("rootNode"))

XmlSerializer uses assembly generation, and assemblies cannot be collected. It does some automatic cache/reuse for the simplest constructor scenarios (new XmlSerializer(Type), etc), but not for this scenario. Consequently, you should cache it manually:

static readonly XmlSerializer mySerializer =
    new XmlSerializer(typeof(XMLObj), new XmlRootAttribute("rootNode"))

and use the cached serializer instance.