On Windows, xml ed -L -P commands (with in-place edit and spaces preserved) output XML with only LF as line endings, even if the original XML file had CRLF line endings. The resulting file is hard to view and edit in simple Windows editors such as Notepad. Please make sure that lines end with CRLF on Windows, or at least preserve CRLF if that is used in the original XML file.
Unfortunately, turning off CRLF is the only reasonable way to avoid adding ASCII CRs in a UTF-16 document. You can avoid this by using UTF-8 instead.