I tried with XML::LibXML::Reader instead. It's just an example (it doesn't handle processing instructions, comments, entities etc.), but it could get you started.

#!/usr/bin/perl
use warnings;
use strict;

use XML::LibXML::Reader;

my $reader = 'XML::LibXML::Reader'->new(location => shift)
    or die;

my $node;

while ($reader->read) {
    if ($reader->nodeType == XML_READER_TYPE_ELEMENT) {
        $node = $reader->copyCurrentNode(0);

    } elsif ($reader->nodeType == XML_READER_TYPE_TEXT) {
        $node->appendText($reader->copyCurrentNode(0));

    } elsif ($reader->nodeType == XML_READER_TYPE_END_ELEMENT) {
        print $node, "\n";
    }
}
[download]

copyCurrentNode(0) creates a "shallow" copy, i.e. it doesn't go into the subtree. It keeps the attributes, though.