  We present initial results from observations of the low-mass X-ray binary EXO
0748-67 with the Reflection Grating Spectrometer on board the XMM-Newton
Observatory. The spectra exhibit discrete structure due to absorption and
emission from ionized neon, oxygen, and nitrogen. We use the quantitative
constraints imposed by the spectral features to develop an empirical model of
the circumsource material. This consists of a thickened accretion disk with
emission and absorption in the plasma orbiting high above the binary plane.
This model presents challenges to current theories of accretion in X-ray binary
systems.
