Actually your understanding of whitespace in XML is almost completely incorrect.
Many XML applications ignore whitespace (after parsing). XML parsers are prohibited from deleting any whitespace that might be part of the data in a document. The xml:space attribute allows a document to indicate places where the author or encoder encourages normalization of space in some way.
This is all clearly explained in the standard itself (W3c XML pages).
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Actually your understanding of whitespace in XML is almost completely incorrect.
Many XML applications ignore whitespace (after parsing). XML parsers are prohibited from deleting any whitespace that might be part of the data in a document. The xml:space attribute allows a document to indicate places where the author or encoder encourages normalization of space in some way.
This is all clearly explained in the standard itself (W3c XML pages).