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In the <option> and <td> tags of a HTML page, if text is found starting with 'http://' (for example, 'http://goto&community.com') the validator will identify these as errors, stating the URL should be encoded. They should not be listed as errors because: a) they are not links b) they are to be presented to the user, so you would NOT want to encode them as you would a similar href link. NOTE: There may be other similar instances where this occurs, these are the only ones I have found so far. My suggestion is that the validator ONLY checks addresses which are specifically used as links in the HTML page.
Sorry but it is irrelevant where this might appear or how it is used, HTML and XHTML have rules for when special characters need to be escaped, these need to be followed. These rules exist so that it is clear what you mean. Consider your example was http://goto or http://goto<p> Now, how should a browser know whether you mean / <p> or &nbsp; / <p>? It cannot know, hence you need to escape the special characters to make this clear. Also note that the Validator is not the right place to discuss such rules, the Validator just implements the rules defined by others, for HTML see the Status section of http://www.w3.org/TR/html4/ on how to send comments on the specification.