Your xml is invalid:

$ php -n t.php

Warning: simplexml_load_string(): Entity: line 3: parser error : Opening and ending tag mismatch: key line 3 and name in /home/jani/src/build/php_5_3_tst/t.php on line 8

Warning: simplexml_load_string(): <key>value</name> in /home/jani/src/build/php_5_3_tst/t.php on line 8

Warning: simplexml_load_string():                  ^ in /home/jani/src/build/php_5_3_tst/t.php on line 8


With non-invalid XML I get expected result.

Thank you for that.  Reproduce code should be as follows:
$xml = '
<data id="1">
	<key>value</key>
</data>
';
$obj = simplexml_load_string($xml);
print_r(get_object_vars($obj));

$ php t.php
Array
(
    [@attributes] => Array
        (
            [id] => 1
        )

    [key] => value
)
[jani@localhost ~]$ php -v
PHP 5.2.7-dev (cli) (built: Oct  9 2008 16:54:00) (DEBUG)
Copyright (c) 1997-2008 The PHP Group
Zend Engine v2.2.0, Copyright (c) 1998-2008 Zend Technologies

So still no bug. If you experience this even with proper XML, I guess it's your libxml that is a buggy version. (my PHP is build with libxml 2.7.2)

It appears that you're testing against 5.2.7 which I've verified doesn't exhibit this error.  This problem only appears with the 5.3.0 releases.

Both the 5.2.* releases and 5.3.* use libxml 2.6.31 on my primary test machine.  It is possible that libxml is part of the problem, but it still stands that the problem does not manifest prior to 5.3.

I have tested this with the two new PHP releases on yet another server:

5.3.0alpha3 Fails:
[] [ian@ianm:~/src/php-5.3.0alpha3/sapi/cli] ./php -v;./php ~/sandbox/bug46048.php 
PHP 5.3.0alpha3 (cli) (built: Dec  4 2008 17:18:52) 
Copyright (c) 1997-2008 The PHP Group
Zend Engine v2.3.0, Copyright (c) 1998-2008 Zend Technologies
Array
(
    [key] => value
)



5.2.8 Passes:
[] [ian@ianm:~/src/php-5.2.8/sapi/cli] ./php -v;./php ~/sandbox/bug46048.php 
PHP 5.2.8 (cli) (built: Dec  8 2008 17:34:28) 
Copyright (c) 1997-2008 The PHP Group
Zend Engine v2.2.0, Copyright (c) 1998-2008 Zend Technologies
Array
(
    [@attributes] => Array
        (
            [id] => 1
        )
    [key] => value
)

I am experiencing the same problem on 5.3. The code used is the same used above.

shephezj@ursa-minor:~/php5/sapi/cli$ ./php -v; ./php ~/code/scrap/php/bugs/46048.php
PHP 5.3.0alpha4-dev (cli) (built: Jan 15 2009 17:22:45) 
Copyright (c) 1997-2009 The PHP Group
Zend Engine v2.3.0, Copyright (c) 1998-2009 Zend Technologies
Array
(
    [key] => value
)

Bug confirmed still be present in 5.3.0beta1.

This bug has been fixed in CVS.

Snapshots of the sources are packaged every three hours; this change
will be in the next snapshot. You can grab the snapshot at
http://snaps.php.net/.
 
Thank you for the report, and for helping us make PHP better.

Thank you!  Confirmed fixed in latest CVS.