Rebecca,
Actually it should work,and also make sure the extension name hierachy matching with SAP side too.
Other alternative might be eliminate the encodeSDATA step and just use the steps transformHierarchyToFlat and transport ALEOutboundProcess.
I believe encodeSDATA will be used by older versions,if you are using new version try with above steps,it should work.
HTH,
RMG.
#Integration-Server-and-ESB#edi#webMethods