WordPress includes an RSS parsing library called SimplePie. WordPress utilizes this open source project to handle the low-level details of parsing RSS feeds.
The version included with WordPress (as of 3.1.3) is 1.2. However this is not the most recent version of SimplePie. Attached to this post is SimplePie 1.3-dev which is compatible with version 1.2 but addresses various issues.
If you are having trouble parsing feeds, you may try downloading this file and replacing the file /wp-includes/class-simplepie.php with this one. Be sure to back up your original file in case anything goes wrong.
Click the package below to download the file: