The mime-type in the Content-Type meta tag doesn't matter. The mime-type that the server sends in the HTTP Response Headers is what matters. Normally you would set the two to be the same, but I'm trying to make a point here that the server controls the document's mime-type, not the document itself.
Since IE does not support application/xhtml+xml, it will ask you if you want to open or save the file instead of just displaying the file like it would if it was served as text/html. Other browsers, like Firefox and Opera, which do support application/xhtml+xml will display it as expected.