khine,
To be able too see the Generate option for xsd files, you have to go to Window > Preferences > General > Capabilities and click Advanced. Expand “MyEclipse Standard Tools” and check “WTP Extras”.
If you now look at the context menu on an XSD file, you will see a “Generate > JAXB Classes…” which should be what you want.
We will be enabling WTP Extras by default in MyEclipse 10, these are just features that are contributed by WTP but aren’t entirely tested or supported by MyEclipse.
Please let me know if you have any further queries.