Sorry, I know it's vague, but I don't have any idea what I'm talking about. My boss just said "Oh, XML Parsers, they can have memory leaks"... Useful, no? :-P
We do have a memory leak somewhere within the application that uses K2, but I really doubt that it's related to this. We have gone over the recommended 2000 site limit in SharePoint and this seems much more likely as the cause.
I don't know if someone would mind commenting on any known stability issues with the XML parser just so I have something to tell him? Obviously if there are no issues then then that's even better. :)