This is one of the more annoying bugs in WordPress. WordPress is working fine, but when you check the RSS feed you get the following error:
XML Parsing Error: XML or text declaration not at start of entity Location: http://domain.com/feed/ Line Number 3, Column 1:<?xml version="1.0" encoding="UTF-8"?> ^
The most common explanation for its cause is blank spaces leading and ending the PHP pages caused by editing the theme. There are two solutions for this problem. The first is the easiest and I would recommend trying this first.
Install the fix-rss-feed plugin. http://wordpress.org/extend/plugins/fix-rss-feed/
Go to Admin > settings > fix RSS Feed
Click on the “Fix wordpress rss feed error” button
This might or might not fix your problem. I have had it work on some themes and it failed on others. If it fails I would recommend the following solution:
The “Wordpress leading whitespace fix” is slightly more involved than the plugin, albeit a very good solution when the plugin fails. The fix is well documented so I will not bother to repeat the steps here. You can read installation instructions and download from here: http://wejn.org/stuff/wejnswpwhitespacefix.php.html