We have just upgraded to Octopus 3, before this upgrade we always had some deployment warnings when doing config transformations that said: Unable to update the config file - it may not be a valid XML file: Reference to an undeclared entity ‘nbsp’.
It now appears that after the upgrade these warnings now fail the deployment.
Sorry about this. Could you give us an example of the file (or at least the parts that cause the errors) and we can add a test case for it? We should be able to ship a 3.0 patch pretty quickly with the fix.