I have solved this problem for my situation at least. I had to do a packet capture of the data to determine what was happening. The XML was not being truncated the view full request window doesn't show the whole request. It also didn't show the problem, which was that the XML had leading white space and used \t, \r and \n to format the data. I turned on the Tolerate leading white space and Tolerate malformed entities to workaround the problem. Unfortunately the application in use generates the XML automatically and the developers have little or no control over it.
Nimbostratus