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Google Adsense does not work with this plugin. Why?

That is a problem with Google Adsense which assumes that you will be sending content as text/html, and it breaks if you send it as application/xhtml+xml. This web page offers a Javascript-based solution that seems to work, and doesn't upset Google.

My browser is giving me an XML parsing error.

This means that your theme is producing invalid XHTML, and you probably need to contact the theme authors. I find that this is most often caused by using invalid HTML entities in the document.

My browser is rendering the document as an XML tree.

This means that your DTD and/or XHTML namespace are incorrect. Check to make sure that the DTD is a valid XHTML doctype and that your html tag contains the XHTML namespace (xmlns="http://www.w3.org/1999/xhtml").