use a substitute for you special character which webMethods does not refer to as a special character while you are sending you data to the TN Receive service. Also check advantage there should be a service pack available as well to get you around this issue.
This malformed exception/error normally happens if the XML document contains special character, in this case ‘&’ (this is also true in Java handling of XML document).
Below might give you an idea:
1: you may want to include a call to stringToDocument with encoding = true to encode all ‘&’.
2: or write a java service to replace the ‘&’ with ‘&’ and other related XML special characters.