In module's "Advanced settings" (admin/config/search/xmlsitemap/settings), set Default base URL value to a single forward slash "/", and save the configuration.
Form is saved without any error.
Once the settings page reloads, Default base URL value becomes empty; which causing the <loc> entries in sitemap.xml to be relative to the site root.
<url><loc>/node-51-article</loc><lastmod>2013-04-04T00:13Z</lastmod><changefreq>hourly</changefreq></url>
<url><loc>/node-52-article</loc><lastmod>2013-04-04T00:13Z</lastmod><changefreq>hourly</changefreq></url>
<url><loc>/node-53-article</loc><lastmod>2013-04-04T00:13Z</lastmod><changefreq>hourly</changefreq></url>
<url><loc>/node-54-article</loc><lastmod>2013-04-04T00:13Z</lastmod><changefreq>hourly</changefreq></url>A patch will follow.