Re: We have taken immediate steps to mitigate this risk.
Well, yeah, because that's a bad idea and doesn't work. You need to be sure that the system that actually USES the XML is parsing it correctly, including doing complete validation on the syntax AND the structure AND the values parsed out of it. Oh, and Postel was wrong. The right aphorism would be "Be conservative in what you generate, and absolutely inflexible in what you accept". Any deviation from the expected protocol should automatically be a fatal error.
If you try to assure correctness with some kind of outboard filtering hack, you open yourself up to differences between the way the filter parses it and the way the actual application parses it (cf Sassaman, Patterson, Bratus, and Shubina: "The Halting Problems of Network Stack Insecurity"). AND you add attack surface; most of those "application firewalls" are full of dangerous security bugs themselves. AND you create an interdependency that makes upgrades dangerous or impossible. AND you complicate your network so you're more likely to make a fatal mistake.
A filter like that might work as a band-aid on a known bug while the application is being fixed, but in practice they're always expected to deal with ALL bugs, known and unknown. They're invariably used as an excuse never to fix the application, and in fact never to demand that the application be correct in the first place... as well as deterring routine updates of the application or its components, leading to ever-growing technical debt. Essentially no organization has the discipline to avoid this, and it predictably leads to failure.
If you let such a device into your network, you may avoid some immediate problems, but you're setting yourself up to lose really big at some unpredictable future time... in a way you won't be able to recover from because you've made everything overcomplicated, created too many dependencies, and let too many things deteriorate.
If you can't create an application that won't choke on bad XML, then you shouldn't use XML.