In this article you mention:
"For some bizarre reason, you must also ensure that the XML is all formatted on one line."
Actually that's wrong. The XML can contain CRs and LFs and TABs and whatever.
The more bizzare reason why compiling the manifest or using the manifest-resource can fail is that the manifest-file MUST be padded to a bytesize dividable by 4 with spaces or similar, e.g. has to be 600 bytes long instead of 599 or 598 or 597 before compiling with RC.exe or using as "Other File" in VBasic.