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The validator does not recognize the iframe tag, but on the w3schools web site, you list the iframe tag as valid xhtml.
Do you have a URL of a document that can be used to reproduce this? By the way, w3schools is not the best resource regarding valid markup. Search for "w3schools" at http://lists.w3.org/Archives/Public/www-validator/ for more info.
Also note that w3schools is not affiliated with the W3C in any way.
As explained in: http://htmlhelp.com/reference/html40/special/iframe.html the iframe element is only available in Transitional Doctypes. See test cases: http://qa-dev.w3.org/wmvs/HEAD/dev/tests/2329-html401-strict_iframe.html http://qa-dev.w3.org/wmvs/HEAD/dev/tests/2329-html401-transitional_iframe.html former not valid, latter is.