I have seen this before. Which version of Xerces are you using? I now download the source from the source code repository from Apache and build my own jar files and this works much better than the binary distribution. If you don't care much about the version, try doing the same. Otherwise, get the latest version at the least and give it a shot.
As you said, even I had sleepless nights trying to figure out this error, but it vanished after I resorted to raw sourcecode
Good luck,
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Ajith Kallambella M. Sun Certified Programmer for the Java�2 Platform.
IBM Certified Developer - XML and Related Technologies, V1.
Co-author of
Java 2 Certification Passport