It might be possible that their encoding produces that error you are getting. The XOOPS headline module currently supports iso-8859-1 or utf8 encoded RSS news feeds, officially.
Which theme are you using? XOOPS is almost completely xhtml 1.0 transitional compliant when using the default theme. There are, however, some pages that aren't, especially in the modules.
kahumbu, you were right, the topicmanager page did not work right when regisrer_globals is set to off. I have now fixed this on CVS, and you would very soon be able to see what I have fixed on the following page (sf.net takes a few hours to be updated):
Thanks mariuss, it was a bug in the update script as you mentioned, and I have fixed this on CVS. As for your upgraded sites, try 'update'ing the modules that have the notifications feature. That should update the config options as well.
Their codes changed quite a lot since 1.4.x, the version which was integrated to XOOPS, and I think it would be a lot harder to update it to their current version than adding features to our newbb module by ourselves.