My team is moving to Spring 3.0 and there are some people who want to start moving everything into Annotations. I just get a really bad feeling in my gut (code smell?) when
Check these answers to similar questions
What are the Pros/Cons of Annotations (non-compiler) compared to xml config files
Xml configuration versus Annotation based configuration
Basically it boils down to: Use both. Both of them have there usecases. Don't use annotations for things which should remain configurable without recompiling everything (especially things which maybe your user should be able to configure without needing you to recompile all)