I have a bunch of Velocity template files in a Visual Studio 2008 project, the problem is that despite the fact that the extension is .vm
instead of .xml<
Have you tried: right-click on a .VM file, select Properties. There you can change the Build Action, you might want to set it to either Content or None.
I add a comment as the first line of the vm file, that way the file doesn't begin with a < and VS doesn't think it's an xml file.
Just add ## as the first line of every file then close and reopen it.
Xml errors usually only show if the file is open.
You can normally disable it by not opening it into the xml editor; the errors don't normally stop a build - they just look like they do. Right click -> Open With... Source (Text) Editor (or HTML if you prefer) (and set as default).