Looks like I missed that behavior. I'll add it in an update. Thanks!

Thanks for letting me know. I'll fix that in the next update.

Well, it's one of the features I miss the most myself, but it's also one with many votes ;) - it's a top priority for me. 

I'm not sure, but does disabling "Indent wrapped lines" in Preferences do what you want?

Never. :)

Textastic is a text editor, not a visual XML editor. You can use an XML formatter/pretty printer like this: http://xmlprettyprint.com and paste the result into Textastic to make the file more readable.