It works fine for us.
http://blog.upperclassvideo.com/?p=172
Perhaps we're doing something different that what you are trying to accomplish.
(we're using the 'old' version 1.x wordpress)
Also, when you are entering direct html, (I believe wp) modifies/alters the contents to make sure that it's valid html. Therefore, you're Rss feed and blog will be valid html. (But, I could be wrong about this)