I found what the issue here is after further consideration. The parse() method is meant to handle both parsing files and strings. If you look at the code that follows that which I included, it tests $ioref to see if there is some kind of filehandle. The line in question (456) is the final attempt to glob a file. The reason that I was seeing it was due to CGI::Carp considering that a fatal error (which the author of Expat.pm doesn't at all). I had to remove the CGI::Carp from the script and handle all my errors myself in an eval{};.
Thanks to everyone who has helped.
BTW, Anonymous Monk, what the heck is absurd about log files being in XML? Works great for me! I can post-process the log file and allow error to be fixed in the browser.
Brian - a.k.a. DrSax