Investigating the problem, it appears the xml is correctly there, it just won't let you edit it.
Credit for this solution goes entirely to EktronRashmi and was posted on the Ektron forum in his post Smart Form with Custom Root Element Doesn't Allow Editing.
This forum post contained the solution (Smart Form with Custom Root Element Doesn't Allow Editing):
Here's a fix for this issue
go to line # 299 and comment out following IF statement block (5 lines)
if ("<" == xml.substr(0, 1) && xml.substr(xml.length - 7) != "")
xml = "
" + xml + "";
bRootTagAdded = true;
He actually puts a nice screenshot in there as well:
Based upon this article, I completed the following steps to fix the problem:
1. Checked the file out of source control
2. Applied the fix listed in the forum post
3. Checked the file in
4. Deployed to site
Smart Form with Custom Root Element Doesn't Allow Editing
Using a Tag Other Than Root