You need to alter the code for serving your stylesheet too. For xml, the stylesheet declaration needs to be like so. (The doctype declaration is there so you can see what your first three lines should look like). Obviously, the encoding type is dependant upon what you have set.
<?xml version="1.0" encoding="utf-8"?>
<?xml-stylesheet type="text/css" href="./style/default.css"?>
<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.1//EN" "http://www.w3.org/TR/xhtml11/DTD/xhtml11.dtd">
I might add, serving it up as Xhtml1.1 will require a decent amount of work on the code, especially if you have installed any mods. The XML parser in the browser, (IE exempted), will throw an error on even the slightest typo, omission or html error, so unless you want to spend a good while going through the code, I'd suggest you stick to text/html. You will also need to make sure that everything printed to screen is html encoded if the output may contain any entities.
As to how a vanilla install of PunBB would fare, I honestly can't say, but a modded install will give you plenty of grief getting it ready.