Creating XML with SQL Server

select
    'FAMILY' AS 'itemID/@type',
    t1.itemID AS 'itemID',
    (
        select
        'EA' AS 'itemQuantity/quantity/@unitOfMeasure',
        t2.quantity AS 'itemQuantity/quantity',
        t2.itemLocation AS 'itemQuantity/itemLocation'
        from Table1 as t2
        where t2.itemID = t1.itemID
        for xml path('availabilityDetail'), type
    )
from Table1 as t1
group by t1.itemID
for xml path ('inventoryItemData')

sql fiddle demo

Is this what you want?

SELECT 
   'FAMILY' AS 'itemID/@type',
   itemID AS 'itemID',
   '' AS 'availabilityDetail',
   '' AS 'availabilityDetail/itemQuantity',
   'EA' AS 'availabilityDetail/itemQuantity/quantity/@unitOfMeasure',
   quantity AS 'availabilityDetail/itemQuantity/quantity',
   itemLocation AS 'availabilityDetail/itemQuantity/itemLocation'
FROM @t
FOR XML PATH ('inventoryItemData')