XML Encode plugin not encoding

I can’t seem to get the XML Encode plugin (1.2) to work (on EE 1.6.3). If I understand correctly, it should take something like this:

{exp:xml_encode}http://test.com?a=1&b=2&c=3{/exp:xml_encode}

…and output

http://test.com?a=1&b=2&c=3

…(ampersands converted to the XML entity &). However, my output is the original unencoded string:

http://test.com?a=1&b=2&c=3

Oddly, if I try:

{exp:xml_encode protect_entities="yes"}http://test.com?id=1&p=&z=26{/exp:xml_encode}

…then the encoded & entities get unencoded, resulting in:

http://test.com?a=1&b=2&c=3

What am I doing wrong?