Replace all newlines as you read in each line with a single space, prepend your model lines with a couple newlines, then print:

use warnings;
use strict;
while (<DATA>) {
    s/\n/ /;
    s/^(\wmodel)/\n\n$1/;
    print;
}

__DATA__
Xmodels node1 node2 D G S S Al=1 X=2 V=2e-6
=? bitval=1 model=bitval20 color=30 
=? coordinates x-val=20 y-val=30 targetDestroyed=yes
=? missionstatus=completed perimeterSecured=yes
=? repeatMission=false newMission=yes
=? ordinance=34!44 countrycode=red
Xmodels node1020 node4300 D G S S Al=12 X=222 V=23e-6
=? bitval=0101 model=bitval28 color=101AFFFB 
=? coordinates x-val=2370 y-val=390 targetDestroyed=no
=? missionstatus=abandoned perimeterSecured=indeterminate
=? repeatMission=false newMission=InexploreStage
=? ordinance=NULL countrycode=purple

Mmodel 300 90 axis-x axis-y 10110001
+ firemethod=automatic burstmode=yes
+ modeltype=gatlin revolve=true
+ mmodellinespeed=3000fps targacquire=manual manned=optional

Mmodel 330 190 axis-x axis-y 1A11FFF1
+ firemethod=automatic burstmode=yes
+ modeltype=FOEAWE revolve=true
+ mmodellinespeed=3000fps targacquire=automatic
+ manned=optional
+ roundspersecond=13000/s
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perlintro