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No there isn't a better method. Also the importing of an updated application xml file over an existing application cannot be guarenteed to provide the expected results, it is not designed for incremental updates. Depending on what you want migrate/update you can, either export to Excel in source and re-import in the target or for items such as scripts you can simply copy them into the appropriate directories on the target. Failing that it's good old manual updates ... enjoy ;-)
Or you can go for the nuclear option you've mentioned at the end of your post!
Here is Oracle's response for anyone else who requires further information on this:
The Import of the .xml files in terms of application creation is meant as a 'once only' event and a result is not meant as a method of post-create administration of the application. Any further imports will just add metadata to the application not replace or merge. If you wish to migrate an application via this method then you will need to get the source application into the state required for the migration then migrate this as a whole. Please note that this will only migrate the metadata of the application.
The other method of migration as you have mentioned in the SR description, is via the database which will migrate the entire application with data.
Please see KB article 806173.1 which gives instructions on the two methods, both of which are the only recommended methods. Please review the article to suit your requirements.