See the report for Empathy https://bugzilla.gnome.org/show_bug.cgi?id=675063
A little more info.
signal sender=:1.299 -> dest=(null destination) serial=2897 path=/org/freedesktop/Telepathy/Connection/gabble/jabber/crtmike_40jabber_2eorg_2f030918ab; interface=org.freedesktop.Telepathy.Connection.Interface.Aliasing; member=AliasesChanged
Can you get a debug log from Gabble, to verify exactly what is being sent to it from the network?
But I think your server is sending you XML which it shouldn't be. RFC 6120 says <http://xmpp.org/rfcs/rfc6120.html#intro-terms>:
some examples in this document use the form "&#x...." as a notational device to represent [UNICODE] characters (e.g., the string "ř" stands for the Unicode character LATIN SMALL LETTER R WITH CARON); this form is definitely not to be sent over the wire in XMPP systems.
The server should be sending you UTF-8, not escape sequences.