Mmm, that's a bug alright. Thanks for the report. As a work around, you can use E<nnn> escapes to get around the lexing problems (specifically C<EE... C<XE... appear to cause problems):

=item C<E<69>E<lt>...E<gt>>

Pod entities are mapped to the corresponding HTML characters or
entities. The most important HTML entities (e.g. C<EE<lt>copyE<gt>>)
are recognized. See also L<HTML::Entities>.

=item C<SE<lt>...E<gt>>

All whitespace in this sequence is turned into C<&nbsp;>, i.e.
non-breakable spaces.

=item C<E<88>E<lt>...E<gt>>
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I'm currently dual-lifing Pod::Html and so I'll try to get this fixed for v1.10. Interestingly enough I've spent a lot of time merely writing a good test suite. I hadn't been able to tickle the code path that produces this error, so I'm grateful for your example.