using "\verb+$projectname+" is a work around. But it does no look very nice when the typewriter font is used.

Axel, have you tried writing PROJECT_NAME = "Foo&Bar Project"?
Within XML comments, that works for me. I've never had to name a project with an ampersand though.

I gave it a try, but it does no work. And "&" is just valid XML, but no valid latex code. So if doxygen does not detect and replace it, it wont work. 
The Error is again:

! Misplaced alignment tab character &.
l.81 Foo&
         amp;Bar Project }\\
!  ==> Fatal error occurred, no output PDF file produced!

It apears that doxygen has to apply some translation on the internal variables for latex output. Maybe for RTF and other targets as well.

I get something similar in 1.7.2: However, dealing with the following doxygen generated Latex output:

\begin{DoxyParams}{Parameters}
{\em param1} & description1 \\
\hline
{\em param2} & description2 \\
\hline
\end{DoxyParams}



The error generated is the same:
Doxygen/latex/group__FILE.tex:46: Misplaced alignment tab character &.

(In reply to comment #4)
> I get something similar in 1.7.2: However, dealing with the following doxygen
> generated Latex output:
> 
> \begin{DoxyParams}{Parameters}
> {\em param1} & description1 \\
> \hline
> {\em param2} & description2 \\
> \hline
> \end{DoxyParams}
> 
> 
> 
> The error generated is the same:
> Doxygen/latex/group__FILE.tex:46: Misplaced alignment tab character &.

Opened up a different bug report for this issue in particular:

#633397

Ive just pushed a solution to github (pull request 79)

Thanks, I've merged the pull request.

This bug was previously marked ASSIGNED, which means it should be fixed in
doxygen version 1.8.7. Please verify if this is indeed the case. Reopen the
bug if you think it is not fixed and please include any additional information 
that you think can be relevant (preferrably in the form of a self-contained example).