Hello Adam,
I'm using version 5, don't know about the .2 though. Anyway, I had the same problem on your example page. Inserted html in the HTML view in correct (validated) xhtml format. After viewing the result in Normal view and switching back to HTML view all the </li> were gone except for the last one. I've tried removing <br/> from list items, reducing the amount of list items etc. (don't ask me why, just trying anything) but the problem remains.
I've just been fiddling around some more and I found out that CuteEditor also strips the closing slash from empty elements like <img>, <br> and <input> (<img src="something" />, <br />, etc.).
After searching a little further I tried your demo on
http://cutesoft.net/example/xmloutput.aspx. On this page it seems to work fine. That is, the </li>'s are still gone after switching from Normal to HTML view, but after submitting the page, the code that is returned is correct. Mind you, that is
not the behaviour on my website. When submitted to the database, the closing tags are gone from the html found in the database.
I suppose there is some setting for CuteEditor to output xhtml, but I couldn't find it. Can you tell me where it is?
Thanks.
Peter