Markdown troubles

I’m having a few troubles with Markdown all of the sudden. I’m trying to get it to do this:
<li id="recentposts"><?php _e('Recent Posts:'); ?>

<?php get_recent_posts(); ?>




But what it does it this:
<li id="recentposts">< ?php _e('Recent Posts:'); ?>

< ?php get_recent_posts(); ?>
</>

</>

It puts a space between a < and the ?php and it puts </> in front of </ ul> and </ li> tags.
It didn't do this, and some of my old posts are fine, but the new ones aren't. They've all got the </> in front of those tags.
So installed the new version of PHP Markdown 1.0, and it completely whacked everything, and when i went back, it wouldn't fix it. All of the sudden, ‘ marks are now written as &#8216` and I can’t do a thing about it. What the heck happened?
Thx.