The problem is that you have the short_open_tag option enabled, and the file is being sent through the PHP parser, thus the PHP parser interprets the "<?xml" as a "<?" PHP start tag followed by the text which follows as un-parsable PHP code.
You'll either need to turn off that option (realizing that any PHP scripts that use short tags will need to be edited), change the file suffix or your web server settings so that the file is not processed through the PHP parser, or actually use PHP to output that xml tag:
<?php echo '<?xml version="1.0" encoding="UTF-8"?>'; ?>