There's a space at the start of your XML file. This is sometimes caused by a plugin. Shut off all your plugins and see if it works. If it does then start them back up one by one until you get to the offending plugin.
It can also be caused by a corrupt wp-rss2.php file, so uploading a fresh copy of that could help.
Lastly, are the characters the correct "UTF-8" encoding.
