The Real XML Way (tm) to solve the < problem is to replace it by &lt;, although this implies that every software that uses the file either knows how to replace &lt; by < or (even better) uses an XML parser to filter the input.

As I mentionned in On XML Parsing any approach not based on an XML parser (including your boss' Python hack) does not usually process the full range of XML feature, so if you chose to move to XML as a format do yourself a favor and use one.

If you chose to use XML you can then use CDATA sections to embed < in elements:

As for XML modules look at Module Reviews for a bunch of reviews and at my site http://www.xmltwig.com/article/ for reviews and benchmarks.