With regards to the "notch" you need to remember that when using the default classes for the menu, you may at times, like this, need to override the settings in the default.css style sheet. You've not assigned any borders in your classes and so the border settings in the default.css are being applied to the menu items. You should download and install firebug in firefox browser and use the "inspect" feature in it. It took me all of 2 minutes to find the source of your issue here just using firebug. In the default css, the top border for the menu arrows is set to 0px, but the top border for the icons and the text is set to 1px which makes things appear to have a "notch" from the missing top border. Try setting your skin.css to include the following:
.MainMenu_MenuArrow {
border-top: solid 1px #ffffff;
border-bottom: solid 1px #ffffff;
border-right: solid 1px #ffffff;
border-left: solid 0px #ffffff;
}
That should resolve that problem. It may be easier for you to override the appropriate classes by copying the classes and their settings from the default.css and pasting into your skin.css. Either that, or assign new class names to them all in the skin.xml so there is nothing that can cascade down into your settings causing problems like this. Someone will probably come along and tell you that Solpart is deprecated and not being developed for several years now, but if you want to use the menu arrows and assign borders to your submenu items, then you are better off sticking with Solpart as the DNN Nav menu is mucked up when it comes to assigning borders in submenu items, and using child menu indicator arrows is also trashed since it applies the arrow to the background image of the submenu item text and the text can actually overwrite the arrow itself. Hopefully, DNN Nav menu will eventually have those issues addressed as they make for some difficulties and excessive limitations when styling the submenus and main menu.
As for the skin.xml problem, perhaps it is more a cache issue somewhere. The syntax looks fine and is exactly as I've used it before without any issue. Try clearing the DNN cache or doing a hard refresh on the page (shift-f5 in firefox, cntrl-f5 in ie). If that doesn't help, then try physically deleting the files in the "cache" folder in the portal subdirectory. And if that doesn't help, try deleting your temporary internet files and see if that helps. If none of those help, then I'm stumped.