my $xpath = XML::XPath->new('xml' => $XML);
foreach my $node ($xpath->findnodes('/foo/bar/element')->get_nodelist) { 
    my $data = my_munge_function($node->as_string);
    my $id = $node->getAttribute('id');
    $xpath->setNodeText('/foo/bar/element[@id=' . $id . ']', $data);
}