Is this valid XHTML? If so, you're in luck -- (untested) SAX to the rescue:

#!/usr/bin/perl -w

use strict;
use XML::Parser;
use File::Find;

my $root_dir = 'c:/test1';

my $p = XML::Parser->new( Handlers => {
    Start => \&handle_elem_start,
    End   => \&handle_elem_end,
    Char  => \&handle_char_data,
});

find(\&wanted, $root_dir);

sub wanted
{
    next unless /(LOG[^\n]*)|(REC[^\n]*)\.xml?/i;
    $p->parse( read_file( $File::Find::name ) );
}

sub read_file
{
    my $filename = shift;
    local (*IN, $/);
    open( IN, $filename ) or die "Cannot open $filename: $!\n";
    return scalar <IN>;
}

my $in_notes;

sub handle_elem_start
{
    my ($p, $name) = @_;
    return unless $name eq 'notes';
    $notes++;
}

sub handle_elem_end
{
    my ($p, $name) = @_;
    return unless $name eq 'notes';
    $notes--;
}

sub handle_char_data
{
    my ($p, $text) = @_;
    return unless $notes;
    $notes =~ tr/\r\n/ /;
    print $notes;
}
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It does kinda scare me that that felt natural.