You can indeed. You can get it to redirect to a full domain or just a sub-domain , so lots of flexibility. And it can work for either primary or secondary blogs too. It’s not just passing XML it’s a full integration of Tumblr, just under your custom address!
Read all about it:
Within Tumblr, e.g. the apps, it works just the same, you keep your username for that blog – but it’s external web page will be routed off your own domain, not with the .tumblr.com ending. But in all other respects it just works like tumblr does via the web.
The big advantage really is that you’re in control of the ownership. Yes Tumblr could still delete your blog, but at least people would have a way to reach your content. And if you back up the blog with a site copier you’ve still got the old content too!