Quote - ...I don't see anything odd in there, and the problem only happened once (referring to "line 2", as others noted above).  If it occurs again, I'll check this file before doing anything else.

No neither do I, but if you've already restarted Poser, and linked your external Runtimes back in, then I wouldn't expect to.

The trick is to goto the prefs folder before you click on the OK to clear the error, and grab a copy of the file.
Sometimes Poser creates a copy of the buggy file called "__XML_ERROR__LibraryPrefs.xml", then writes a clean LibraryPrefs.xml

The annoying thing is I know I've seen this error before while working on code that writes LibraryPref.xml files.
Also found a report of a previous occurence -> http://www.renderosity.com/mod/forumpro/showthread.php?thread_id=2500056
Not much help unfortunately.