All,
I get this error when I purposely insert a bad character into my xml. I put a hexadecimal value of 0x12 in my xml and it caused this error because 0x12 is outside the valid domain for XML 1.0. I would suggest scrubbing your XML file for bad characters, here is the domain:
#x9 | #xA | #xD | [#x20-#xD7FF] | [#xE000-#xFFFD] | [#x10000-#x10FFFF]
-Alex