This plugin attempts to take arbitrary posts and comments and transform them into valid XHTML, a standard that describes how web-pages should be writt
Almost certainly not. I use X-Valid personally and have never had anything get lost. X-Valid has been downloaded hundreds of times and there have been no complaints so far. On the other hand, no guarantees are made, you use it at your own risk. What it will sometimes do is remove tags that are unneeded, or erroneous (such as close tags without open tags). Beyond these basics of correction, the default settings are conservative and it chooses to warn rather than remove or add extra tags without your permission. You can change these if you like. None of the combinations of settings I've personally chosen have resulted in data loss.
This should be fixed in 0.99. If it isn't, drop me a line. For versions prior to 0.99, this is because the output file isn't deleting itself properly like it should. To fix this, delete the xv_output.php file from your wp-content folder manually. It probably happened because the document has more tags than X-Valid's internal limit.
X-Valid displays a small message underneath the main post textbox when you are writing a new post. If you see this text all should be good. The best test is of course to just feed it something you know is wrong. Try entering something like this and see if it gets fixed:
<b><i>A witty quote proves nothing</b></i>
Yes and no. Versions 0.99 onwards only support WordPress 2.0. Versions 0.95 onwards only support WordPress 1.5. For a version that works for 1.2.x use X-Valid 0.92. This version only validates against the Strict 1.0 doctype. Compatibility with WordPress 1.3 is an unknown quantity, but if you are using this you really should upgrade to 1.5 as 1.3 was only ever alpha code...