You can use xmllint to pretty-print ugly XML files on your terminal. Just say:

xmllint --format file.xml

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That will restructure containers nicely into individual sections with proper indentation.\
Note that it will automagically work on gzipped XML files!

To write pretty output to a new file, just use the -o switch (short for --output):

xmllint --format file.xml -o pretty_file.xml

See the xmllint man page Show archive.org snapshot for other useful switches and more information.