A few comments, although I'm afraid I didn't understand all the details of your code snippet nor interpret any of those correctly. Partly due to the unusual indenting that doesn't lend itself immediately:
- Although braces don't hurt and the parser will understand / eliminate them, too many of them makes the code difficult to read. {if (vn<=10) {vnx=vn } } can be written as if (vn<=10) vnx=vn without sacrifying logics but improving readability.
- for every single input line, you execute those nested loops 20 x 4 x 26, i.e. 2080 times - quite lengthy for more than a few input lines.
- instead of the 16 ifs for the vnx constants assignment, you could use an array.
- you seem to execute 2080 gsubs on $0 with different patterns, each and every one overwriting the former ones - not sure if each of those really makes sense and is necessary.

I could imagine that if you explain your problem verbosely in plain English supporting this with a few meaningful examples, people in here could come up with a taylored, crisp proposal on how to improve and accelerate the solution.

EDIT:
This

Code:

{ /<sense id=\"n.*" level/; {vID = substr($2, 1, length($2)-1)}}

is NOT a pattern {action} pair and will change vID with every new input line. Is that intended? Why then the /<sense id=\"n.*" level/?


EDIT 2: After replacing the gsub with a print - just as a proof of concept - , this yields the identical output as your code above:

Code:

awk '
BEGIN   {split ("1 2 3 4 5 6 7 8 9 10 I II III IV IV. V V. A B C D E F G H", VNARR)
         VNARR[0] = 0
        }

        {vID = substr($2, 1, length($2)-1)

#               Used for testing to see value:
#               {print "vID: " vID}

#               If matched then print section divider
         for (vid = 0; vid <= 19; vid++)
           for (vl = 0; vl <= 3; vl++)
             for (vn = 0; vn <=25; vn++)        print "<sense " vID "." vid "\" level=\"" vl "\" n=\"" VNARR[vn] "\" opt=\"n\">", vdefSep
        }

' file