If you say notepad you mean windows built in notepad or the useful notepad++?
If you work with XML or any other format than plain text, I advice to use a real editor. I prefer SciTE as it is free and has good highlighting, Notepad++ as mentioned in the first sentence is also good and free. If you want to spend money there is UltraEdit or Dreamweaver. Last but not least you can use Eclipse where you even have a wizard like interface for XML and a folder tree in the editor.
As it is XML it doesn't matter if it is on one line or spread over multiple lines with proper indenting. It is just way easier to edit them if the tags are proper nested.