The Switch to application/xhtml+xml was an interesting experiment but enough is enough. IIS is just not liking some of the browser interactions so until I figure out what is going on with these Server 500 errors, I'm falling back to html/text.
I'm fairly confident that this is not related to named entities, because one evening I was able to get a very plain page (as bare bones as I could get with Vine Type) up and it also returned the Server Error 500 message to the W3C validator.
I plan to bring up a test site with a very plain template and try to work with MS IIS support folks to track down the source of the failure. I'll post results here when they are available. Until then, your browser will be forced to slog through my XHTML 1.1 valid site via the tag soup parser.