I would go for the twig_handlers approach. Here is something I knocked together very quickly. Note you have a missing '</list>' closing element in your XML. It doesn't produce quite the same output but I am sure you can tailor it for your own purposes.

use strict;
use XML::Twig;
use subs qw(say);

my $twig = XML::Twig->new( 
    twig_handlers => { 
        head => \&head,
        para => \&para,
    }
)->parsefile("foo.xml");

exit;

sub head { 
    my ($t, $e) = @_;    
    say '<h3>'.$e->text.'</h3>';
}

sub para { 
    my ($t, $e) = @_;
    process_children($t, $e);
}

sub list { 
    my ($t, $e) = @_;
    say '<ol>';
    process_children($t, $e);
    say '</ol>';
}

sub item {
    my ($t, $e) = @_;
    say '<li>'.$e->text.'</li>';
}

sub process_children {
    my ($t, $e) = @_;
    
    map {
        if ($_->is_text()) {
            say $_->text;
        } else {
            &{\&{$_->gi}}($t, $_) if exists &{$_->gi};
        }
    } $e->children();
}

 sub say {
    return print 'TX ', @_, "\n";
 }
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