my issuse isn't with the XHTML formatting, but the human readable formatting.
i just gave a simple example, if you go to the online demo at:
http://www.cutesoft.net/example/general.aspx

in IE, I switch to HTML mode and I get nicely formatted HTML:

<table cellSpacing="4" cellPadding="4" bgColor="#ffffff" border="0">
   <tbody>
       <tr>
           <td>
              <p><img height="53" src="http://cutesoft.net/Uploads/j0262681.jpg" width="80" />
              </p>
           </td>
           <td>
              <p>When your algorithmic and programming skills have reached a level which you cannot improve any further, refining your team strategy will give you that extra edge you need to reach the top. We practiced programming contests with different team members and strategies for many years, and saw a lot of other teams do so too. </p>
           </td>
       </tr>
       <tr>
           <td>
              <p><img height="52" src="http://cutesoft.net/Uploads/PH02366J.jpg" width="80" />
              </p>
           </td>
           <td>
              <p>From this we developed a theory about how an optimal team should behave during a contest. However, a refined strategy is not a must: The World Champions of 1995, Freiburg University, were a rookie team, and the winners of the 1994 Northwestern European Contest, Warsaw University, met only two weeks before that contest. </p>
           </td>
       </tr>
   </tbody>
</table>
<br/>
<br/>

In Mozilla, I switch to HTML mode and I get everything on ONE line:

<table bgcolor="#ffffff" border="0" cellpadding="4" cellspacing="4"><tbody><tr><td><p><img src="http://cutesoft.net/Uploads/j0262681.jpg" width="80"></p></td><td><p>When your algorithmic and programming skills have reached a level which you cannot improve any further, refining your team strategy will give you that extra edge you need to reach the top. We practiced programming contests with different team members and strategies for many years, and saw a lot of other teams do so too. </p></td></tr><tr><td><p><img src="http://cutesoft.net/Uploads/PH02366J.jpg" width="80"></p></td><td><p>From this we developed a theory about how an optimal team should behave during a contest. However, a refined strategy is not a must: The World Champions of 1995, Freiburg University, were a rookie team, and the winners of the 1994 Northwestern European Contest, Warsaw University, met only two weeks before that contest. </p></td></tr></tbody></table><br><br>