if you are returning json inside of an xml doc, why not just return the json and set the ajax datatype to json, jquery will turn it into a javascript object in your success callback.
Edit: Generally, a parse error when dealing with XML means there is something wrong with the xml, try opening the xml in internet explorer, it'l tell you if it thinks it is valid or not. or you can plug it into any of the other xml validators
Edit2:
http://validator.w3.org/check shows your xml as valid, not sure what to look at after that, 200 response means the page was returned correctly, but parse error, it didnt get parsed correctly. I'd still suggest returning json as json rather than xml