It looks like the issue where desktop blogging clients strip html tags is still an issue. I noticed that there was an update to libxml on Fedora Core 8 and I was hoping it would fix the issue, but unfortunately it does not appear to fix that particular issue. Based on the comments on PHP Bug #45996, it does not appear to have been resolved yet, but it does appear to be affecting quite a few more people so hopefully it will get taken care of soon.
As I mentioned in my first post, implementing the workaround did not seem to work for me (I’m running Fedora Core 8, with Plesk and many customer/personal websites) but if anyone knows how to do it or know of any other workarounds, please post in the comments.
Here are links to sites I have visited with good information on the problem. If you have any others, please let me know.
http://social.microsoft.com/Forums/en-US/writerbeta/thread/62ad697b-ed19-4b0b-ae6a-32bec06b142b/