The best tool to transform XML is XSLT.  It's a little funky to learn, because 
it's a "functional programming language"  but it's designed for XML.  I used it 
this way

<?xml version="1.0"?>
<?xml-stylesheet href="transformer_stylesheet.xsl" type="text/xsl" ?>
<!DOCTYPE my_input [<!ENTITY myfile SYSTEM "Your file name">] >
<my_input space="preserve">
&myfile;
</my_input>

The stylesheet does all the work.  You'll find information about XSLT around 
the 'net. I don't claim to be good at it, I hack away until I get what I need. 
Note that the contents of &myfile do not _have_ to be XML, I have used this to 
transform calendar text files into XML and played with extracting info from 
COBOL source.  Also note: I have not done this with the XML you're talking 
about.

I don't remember (Semi-retired) if z/OS contains a 'batch' XML processor;  the 
one I have on my PC at home was XT, written in Java.

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