You need to do this:
<SovereignUnitType>George_Bush</SovereignUnitType>
NOTE: George_Bush is not a real leader. You'd need to set that to your sovereign's InternalName.
I have no idea what PreferredLeader does, could you elaborate on that?
Also, you can copy the sovereign into the faction file if you want as long as you keep the coding separate (see how XML declares and ends documents).