Cisco 7960 - How to program the buttons on the side to be speed dial buttons?

You do it on the phone, and not the SIP file.

Here is how to do it:

1: Hit settings button.
2: Go to Call Preferences.
3: Down at the bottom, or option 9, is "Speed Dial Lines"
4: Select which line you want to add a speed dial to.
5: Give it a label and number and click "Accept"

Now you have a speed dial! :)

If there is a way you do it from within one of the cnf files then it's news to me. :p

This works in 8.3, have you tried the XML code?

 </line>
      <line button="4">
        <featureID>2</featureID>
        <featureLabel>Sean</featureLabel>
        <speedDialNumber>*80439</speedDialNumber>
      </line>