I am seeing the same thing. Here's my problem:
I had a sub directory in my repo that contained a library that was 2 levels deep. (eg. directory structure ProjectA/lib/releases) I deleted the lib directory and replaced it with an external that had a slightly different structure (lib/releases/v1) I had problems with the external lib, so I reverted to the previous revision.... and that is where the problems started. The XML problem shows up as an error in the server log (using VisualSVN Server, its in the event log). This reads "Working copy path 'Project/lib/release' does not exist in the repository (404, #160013)." with event log entries "Provider encountered an error while streaming a REPORT response" and "A failure occurred while driving the update report editor". Also, when I try to update, I cannot - it complains that the sub dir (lib) "<external repo>/lib/release isn't in the same repository as <root of my repo>" and refuses to update my working copy to the latest revision (that has the external property removed and the old lib/release directories restored). So I'm stuck having to wipe my WC and re-check it out. I assume this is because the new single .svn is doing a few checks on the contents of the WC and reporting what it sees as inconsistencies when it should be updating to the latest repository structure - and taking changes to externals into account. I have removed the offending directory, hoping that it would then realise it was missing and updating it - but it still fails with the 'not same repo' error described before. Note that trying to revert to get the latest revision doesn't work either - the error reads "the node lib comes from unexpected repository <repo root>, expected <external repo>; if this node is a file external using the correct URL in the external defintion can fix the problem, see issue #4087". (My issue is its not a file external) Cleanup also fails to work - same error as revert. Also update to revision, and revert to revision fails with same 'not same repo' error. So what to do!! thanks, Andy (svn 1.8 - latest TortoiseSVN on the client and last-but-one VisualSVN server, so 1.8.4)