Some progress, I've remembered what caused this error, and can reproduce the message by making certain changes to LibraryPrefs.xml

Still don't know why your getting though, as I only ran into it before because I was creating a LibraryPrefs.xml using a Java program, but for the record (and I realise it won't mean a great deal to anyone who does know much about XML) the cause is that if for some reason the xml declaration in the first line isn't exactly

<?xml version="1.0"?>

E.g. if there's even an extra space between the " and ? then when Poser writes out the file you end up with 

<?xml version="1.0"?><br></br><?xml version="1.0" ?>

which is why Poser reports junk in line 2.

One possible cause of this problem may be that the code is trying to add an encoding declaration, which although legal according to the xml specification, Poser doesn't cope with them.