The answer turned out to be easier than i thought, but it was a but of a struggle getting there as most answers are tuned toward your CLIENT also being a WCF client (which is the case in about 5% of my use cases).
The answer is to construct your Xml and use the Xml Schema type attribute to define the type of the object when passing it to a method that accepts its base class.
So if i have a web service method "Accept":
public void Accept(MyBaseClass val);
... and if i have the class MyClass : MyBaseClass , then in code i can simply write:
MyBaseClass bc = new MyBaseClass();
Now, to do the same in an XML REST POST WCF scenario, you construct the following Xml:
Notice the type attribute is used to state the derived class.