james,
I just used your steps and received no validation error, here is exactly the contents of my file:
<?xml version='1.0' encoding='utf-8'?>
<!-- A SAMPLE set of slides -->
<slideshow
title="Sample Slide Show"
date="Date of publication"
author="Yours Truly"
>
<!-- PROCESSING INSTRUCTION -->
<?my.presentation.Program QUERY="exec, tech, all"?>
<!-- TITLE SLIDE -->
<slide type="all">
<title>Wake up to WonderWidgets!</title>
</slide>
<!-- OVERVIEW -->
<slide type="all">
<title>Overview</title>
<item>Why <em>WonderWidgets</em> are great</item>
<item/>
<item>Who <em>buys</em> WonderWidgets</item>
</slide>
</slideshow>
First try: File > Switch Workspace > C:\tempworkspace, hit OK. Now create a new project of any kind, create a new XML file (test.xml) and paste in the contents from that file you linked, now save it. Any errors?
If you have the patience, I would be curious what a fresh Eclipse 3.1 SDK install + MyEclipse 4.0 GA install + New Workspace + New Project + This sample file would yield. I’ve seen stale workspace caches create much stranger errors than this before.