I don't think it's necessarily harmful to render XHTML 1.0 as text/html, because text/html is an officially supported MIME type in the specification. XHTML 1.1 and 2.0, however, should not use text/html, but rather text/xml, application/xml, or application/xhtml+xml, only the first of which can be implemented with any degree of success in most browsers. (I can't count the number of times I've seen XHTML 1.1 rendered as text/html, and because the validator doesn't complain the designers don't think they're doing anything wrong.)
That said, I don't think it's necessarily a bad thing that people insist on HTML doctypes when using text/html. The W3C still advocates use of HTML 4.01 along with XHTML 1.0 and 1.1, and chances are browsers will support HTML for the next ten years at least. XHTML 2.0 isn't going to be an official W3C Recommendation until September 2008, and IE won't support it until probably 2010 or 2011 (or, if they take as long as they did with PNG support, 2019!). Even the most current browsers lag a bit behind, though; XForms are an official W3C Recommendation now and AFAIK only Firefox 3 can handle them.
Jonathon VS
Freelance Web Artist
www.jonathonvs.com