Powershell saving XML and preserving format

If you would like to correct the CRLF that gets transformed to LF for text nodes after you call the Save method on the XmlDocument you can use a XmlWriterSettings instance. Uses the same XmlWriter as MilesDavies192s answer but also changes encoding to utf-8 and keeps indentation.

$xml = [xml]([System.IO.File]::ReadAllText($fileName))
$xml.PreserveWhitespace = $true

# Change some element

#Settings object will instruct how the xml elements are written to the file
$settings = New-Object System.Xml.XmlWriterSettings
$settings.Indent = $true
#NewLineChars will affect all newlines
$settings.NewLineChars ="`r`n"
#Set an optional encoding, UTF-8 is the most used (without BOM)
$settings.Encoding = New-Object System.Text.UTF8Encoding( $false )

$w = [System.Xml.XmlWriter]::Create($fileName, $settings)
try{
    $xml.Save( $w )
} finally{
    $w.Dispose()
}

You can use the PowerShell [xml] object and set $xml.PreserveWhitespace = $true, or do the same thing using .NET XmlDocument:

$f = '.\xml_test.xml'

# Using .NET XmlDocument
$xml = New-Object System.Xml.XmlDocument
$xml.PreserveWhitespace = $true

# Or using PS [xml] (older PowerShell versions may need to use psbase)
$xml = New-Object xml
#$xml.psbase.PreserveWhitespace = $true  # Older PS versions
$xml.PreserveWhitespace = $true

# Load with preserve setting
$xml.Load($f)
$n = $xml.SelectSingleNode('//file')
$n.InnerText = 'b'
$xml.Save($f)

Just make sure to set PreserveWhitespace before calling XmlDocument.Load or XmlDocument.LoadXml.

NOTE: This does not preserve white space between XML attributes! White space in XML attributes seem to be preserved, but not between. The documentation talks about preserving "white space nodes" (node.NodeType = System.Xml.XmlNodeType.Whitespace) and not attributes.