I am using Xcode 4.2.1 and I have this problem running an existing application on the iOS simulator:
svn: The path \'.\' appears to be part of a Subversion 1.7 or
Xcode doesn't yet support SVN 1.7. Only 1.6 is supported. In order to fix your problem, you'll need to switch to using an SVN 1.6 compatible working copy.
Since SVN 1.7 client is unable to work with 1.6 working copies at all, you'll need to remove SVN 1.7.x from your client and revert to 1.6. (Or perhaps just adjust your PATH so the SVN 1.6 tools are first.) Once 1.6 is back, delete or move aside your existing working copy and check out a fresh copy with SVN 1.6. Now Xcode should be able to work with your working copy.
Note that you can freely use SVN 1.6 client with an SVN 1.7 server. Some of the newer features won't be available, but it will work. There's no need to downgrade the server or your server-side repositories.
Keep an eye on the Xcode release notes in updates as I'm sure Apple will note when Xcode is capable of using SVN 1.7. When a 1.7 compatible release of Xcode becomes available, it should then be safe to upgrade your client to 1.7 and migrate your working copy again.