- If a file is saved locally and loaded within Firefox, it should be saved with a ".xml" (or possibly ".xhtml") extension.
- If a file is served dynamically from a server, all that is needed is that its content be identified as "application/xhtml+xml" [as I had mentioned previously].
- If the file is put on a "generic webserver" that can't be configured by the user, Firefox will ignore the svg code if the extension of the file is ".xml" or ".html". However, I did find a workaround: use a ".xhtml" extension and, when prompted by Firefox as to what application to use to open such file, select Firefox itself. The file will be downloaded locally and displayed correctly. At least, this is what happens on a Mac with Firefox 3.
Update: The test case has been improved with styling.
Update 2: A new picture perhaps gives a better idea of a more realistic use case.