I had some time and experimented with the above mentioned 'problematic' XML file by removing bits of code and encrypting it and the result is the simple XML file (attached) which causes 1.20 Krpanotools to crash here on my Win10 , 64 bit.
If I remove the first comment with a typo or correct it, the file is encrypted without any problem.
I confirm the problem (also on win10, 64 bit)
Note that if using 'ENCRYPT XML droplet.bat' there is no real crash and no error message but it produce an empty file (instead of the encrypted content).