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Both the Python ET and _elementtree use expat, but reach its parsing function in a different path when given a file-like object (StringIO, BytesIO).
Python ET reads the stream itself and passes the data to pyexpat's Parse method, which uses PyArg_ParseTuple to decode it. The latter turns a string into bytes when required, so the parsing of str streams is handled transparently.
For _elementtree, on the other hand, ET directly calls the internal XMLParser._parse, which uses its own (C) loop to read from the stream. When it sees that it hasn't read bytes (but a string) it stops and falls back on parsing an empty document.
The fix will have to be in the latter loop, probably just converting the read string to bytes before moving on.