You are right about this being an XML issue. We have done some testing, and have managed to reproduce the problem. The problem is to do with characters treated as ‘special’ by XML.
We have updated the applet (Template System) to provide support for these special characters. It will be made available for download from here within the next few days. In the meantime, you can obtain a copy of the applet by sending an email to firstname.lastname@example.org.
Thank you again for your valuable feedback.