Marshaller.dump_string() encodes a byte string in <string>...</string> using the escape() function. A byte string can be encoded in base64 using <base64>...</base64>. It's described in the XML-RPC specification, but I don't know if all XML-RPC implementations do understand this type.
http://www.xmlrpc.com/spec

Should we change the default type to base64, or only fallback to base64 if the byte string cannot be encoded in XML. Test if a byte string can be encoded in XML can be slow, and set default type to base64 may cause compatibility issues :-/