I’m not familiar with that module, but I think you may just need to add the media type “application/alto+xml” to the list of allowed types in the Security settings for the installation. It looks like you’re just hitting the core’s normal checks of mimetypes for uploaded files.
Thanks John, it was indeed just a matter of adding application/alto-xml to Allowed media types and xml to Allowed file extension in Omekas Global settings. After this I could upload the Alto xml files!
(To see the end-result and IIIF-Search module in action, goto to Adresboek 1885 · Data · Gouda Tijdmachine which is a scanned+ocr’d addressbook from 1885 and input “timmerman” (=carpenter) in the “Search within this item” bar below the scans in Universal Viewer to see all places this word occurs in the scans/transcriptions).