Bit level vs byte level

Am I correct in believing that video game consoles such as the NES used graphics and instructions at the bit level?  Why don't modern operating systems use instructions that are only a few bits rather than bytes?  You'd be doing the same operations at 1/8 the scale.

Why would you use XML for anything in the first place? It's ugly and you're better off using a lean regex library than a fat bloated xml library.