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According to the XML spec http://www.w3.org/TR/xml/:
The ampersand character (&) and the left angle bracket (<) MUST NOT appear in their literal form, except when used as markup delimiters, or within a comment, a processing instruction, or a CDATA section. If they are needed elsewhere, they MUST be escaped using either numeric character references or the strings [ampersand amp semicolon] and [ampersand lt semicolon] respectively.
So your XML is not valid. You can fix it by replacing the ampersand with the escape sequence or enclosing the text in a CDATA section.
I don't know if Smooks provides an easy way to escape the special characters. Maybe a Smooks expert can comment on that.
This is an XML issue... you need to escape reserved characters (& < > etc) wit their entity reference equivalents. So "&" should be represented as "&".