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Do I need to load XUL from the chrome directory?

No. XUL may be loaded from any location. Mozilla has a special chrome system which allows files to installed as chrome. This allows applications to perform any operation without security restrictions.

Applications can be installed as chrome either by creating an XPI installer or by manually editing the file 'installed-chrome.txt' in the 'chrome' directory.

The 'chrome' directory is just where Mozilla keeps its own applications, such as the mail client and Chatzilla. You may install your application in any directory you wish and it will still have chrome privileges and long as it is installed correctly.

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