Just as an aside... If the same XML (or even larger) is submitted via command line curl then it works as expected. No idea why libcurl and the DMS API Tester both fail in Tomcat.
# curl -v
curl 7.19.7 (i486-pc-linux-gnu) libcurl/7.19.7 OpenSSL/0.9.8k zlib/1.2.3.3 libidn/1.15
Protocols: tftp ftp telnet dict ldap ldaps http file https ftps
Features: GSS-Negotiate IDN IPv6 Largefile NTLM SSL libz
# curl -d @test.xml -0 https://USERNAME

ASSWORD@DMMIPADDRESS:8443/xTAS-core/api/rest/playlist --insecure -H "Content-Type: application/xml;charset=UTF-8" --verbose