You have to use the full Forms Services URL. OPen a browser form, copy the whole URL, and use that. Basically, you need the part that tells it to open in the Browser and the XSNLocation attribute, but the Source attribute is also very important.
My recommendation is to copy the entire thing and go with that. Then, if you need to make it dynamic (i.e. in a workflow), then substitute the XmlLocation value with the Encoded Absolute URL variable.
What you're using is the direct link to the XML file, which causes the exact behavior you described.
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