Why xhtml valid code is not validating as w3c valid code - why?
It can't! If you want w3c valid code then tick the w3c valid code box in the code generation page. If you want xhtml valid code then tick the valid xhtml valid code.
You can't have w3c valid and xhtml valid. Personally I don't see the need for xhtml valid code on a website so I'd recommend to go with w3c.
Answers to the majority of questions we receive can be found here in the knowledge base.