I read the thread you mentioned and all others relating to this issue - seems to be a number of people having the same issue over the last 3 years, but none have posted a successful conclusion. I did see the post about strange characters in file names causing issues in the XML - I did also look at this and change all my content file names to innocuous "Chapter_X" & etc. The paths to the "Sources" directory are all relative and the project works correctly on Chrome and Firefox. Just safari is not working. Agree, it could be permissions, but I have checked all security settings and the Abobe Flash player (with is called up by the script to display the videos in the browser) is specifically permitted to "Allow Always" in the security settings. I can't help thinking there is a problem with the generated XML that safari is not behaving correctly - it wouldnt be the first time that Apple doest things using their interpretation of a standard.
However, after all that, the generated code from Encore doesn't result in a working local project that I can send to a client and expect to work.