It seems that the designer tries to look up the xml-shema file for the processdefinition.xml.
There is a workaround:
Remove the line
from the processdefinition.xml and you will have no more trouble.
I actually put those lines into my file. I had created the file with 3.0, which didn't insert the schema definition data. With the schema lines in there, the xml editor will do auto-complete. This is very useful, because while the graphical editor is nice, there's a lot of functionality it doesn't model that has to be hand coded.
Is removing that line going to remove the auto-complete? Its Monday morning, and I'm not looking at the code, so it might not, but I'm kind of assuming it will.
However, that does help narrow down the problem significantly.
Yes, the xsd lookup is probably the problem. I am dependent on the work of the WTP project however, and I did not have time yet to investigate the reason or ask for a fix from these guys (which will without doubt take a while to make it into a stable WTP build). We probably have to stick with this for a while. So if the delays are really bothering you, you can indeed remove the xsd reference at the price of no more autocompletion.