Problems importing WordPress WXR export into new WordPress site

Hi there.
I am having some major issues importing a self-hosted WordPress wxr export file into the new development site. The export goes along fine, no issues or warnings there.

The issues lay in the import process. Every time I attempt to import the wxr xml file I am fed this error message

“Invalid file – Please upload a valid WXR (WordPress eXtended RSS) export file”.

I have spent literally hours looking for people with a similar problem and have found nothing that has helped me. The export is coming from WP ver. 2.8.3 and the version i’m developing in is WP ver. 3.0.3.

The site has no upload issues of other file types, so I don’t believe that folder permissions are the issue. The files can be seen in my media library as well as within the uploads file directory. The odd thing with these is that have now got a ‘_.txt’ extension added to them? Not sure if that is something unusual or not, haven’t come across it anywhere?

In my trouble shooting I attempted to export the dummy content from the blog and import it, with no success? So I do not think that it is a WP version issue.

The development environment I am working in is local, through MAMP. If anyone has any help or suggestions I would be forever greatful. This is truly driving me nuts!