Actually, the above is a properly escaped multi-line XML attribute value. You need to unescape the attribute value (or rather your XML parser should do that for you) before processing the data! ( is the entity for carriage return.)
Anyways, yEd's SVG export is handled by BATIK, which is a widely used SVG toolkit that is known to be very compliant to the SVG standard. Moreover, embedding raster images in SVG documents is quite certainly a very common use case which is why I doubt very much that this feature is broken. If you disagree, try contacting the BATIK users mailing list for a discussion on embedding raster images.
