Ok I found a decent workaround on Adobe's Bug Base ([#SDK-19811] SOAPEncoder double-encodes string values in AS proxy code generated from .NET web services. - Adobe Bug System)
Francis Potter's 3/23/09 comment was the key:
"The problem is in XMLEncoder.as, line 1784, which says:
currentChild.appendChild(xmlSpecialCharsFilter(Object(value)));
In Flash Player 9, it was necessary to filter for XML special characters before passing a string into appendChild, so this made sense.
But for FP10 and AIR, appendChild itself escapes the strings (See Bug #1131) which is a more sensible approach but means [double-escaped] strings."
So to eliminate the double-encoding of the XML I introduced a function that does nothing except return the string (Object) that is passed to it. Then I assign that function to the xmlSpecialCharsFilter property of the WebService component.
<mx:WebService
id="webService"
wsdl="http://...asmx?WSDL"
showBusyCursor="false"
fault="apiFaultHandler(event)"
xmlSpecialCharsFilter="{ function justReturnStringUnencoded(value:Object):String { return value.toString() } }">
<mx:operation
name="GetDocumentMetadata" result="apiGetDocumentMetadataResultHandler(event)">
</mx:operation>
</mx:WebService>
This was fixed in the 3.4 release but it seems 4.0 has introduced a regression.
