Using TreeBuilder to put data into XML tree.
Convert that tree to a string.
Parse that string.
XML parser error.

I expect XML library to be able to parse its own output.

Reference example: https://github.com/FinchPowers/python_xml_builder_bug/blob/d98b2422d9ecadbee37e2896a5098abf82b1d7a4/python_xml_builder_bug.py

Note that you cannot copy paste the code and expect to reproduce the issue because it contains special characters that cannot be copy pasted via a web browser.

Here is the output when run.

<?xml version='1.0' encoding='utf-8'?>
<top><line>2015-03-12 09:44:54.560 script runner plugin Hello, world</line></top>
Traceback (most recent call last):
  File "python_xml_builder_bug.py", line 17, in <module>
    ElementTree.fromstring(io.getvalue())
  File "/System/Library/Frameworks/Python.framework/Versions/2.7/lib/python2.7/xml/etree/ElementTree.py", line 1300, in XML
    parser.feed(text)
  File "/System/Library/Frameworks/Python.framework/Versions/2.7/lib/python2.7/xml/etree/ElementTree.py", line 1642, in feed
    self._raiseerror(v)
  File "/System/Library/Frameworks/Python.framework/Versions/2.7/lib/python2.7/xml/etree/ElementTree.py", line 1506, in _raiseerror
    raise err
xml.etree.ElementTree.ParseError: not well-formed (invalid token): line 2, column 35

Use \x escapes to construct your example, then.

Updated file where copy/pasting works.

This is a duplicate of Issue5166.  Note that in your example, you are not serializing valid XML 1.0: \x1b (ESC) is not a valid XML character, it has to be escaped and, as the discussion in Issue5166 points out, etree does not automatically do that for you.