QUOTE:
When i try to import content back into site i get this error

Upload component - Upload Failed
ERROR: Could not find a Joomla! XML setup file in the package.

There may be a character in the XML install that won't parse through the Joomla install process.

Have you copy/pasted anything from MS Word into the source site?
If you go through the install file in the trouble shooting section see if you can see any characters that are not displayed correctly.

Is this all English or another language?

To test whether it is a character or not try creating a test page or section/category/content item and just enter a couple of words on the page, then try and see if it will successfully Export/Import.

If it does it will be the above character issue.

Also check that the below directories are writable:
/administrator/components/com_export_content/zip..
/administrator/components/com_export_content/new_version..
/administrator/components/com_export_content/img..

And one other thing it might be is the server upload limit which may be set as low as 2meg.

Please post back with your results.