<p>I am looking for a tool which will take an XML instance document and output a corresponding XSD schema.</p>

<p>I certainly recognize that the generated XSD schema will be limited when compared to creating a schema by hand (it probably won't handle optional or repeating elements, or data constraints), but it could at least serve as a quick starting point.</p>

the
Microsoft XSD inference tool
is a good, free solution. Many XML editing tools, such as XmlSpy (mentioned by @Garth Gilmour) or OxygenXML Editor also have that feature. They're rather expensive, though. BizTalk Server also has an XSD inferring tool as well.
edit: I just discovered the .net
XmlSchemaInference
class, so if you're using .net you should consider that