VBScript XML indentation with CDATA

The first misconception I see in your code is the assumption that <?xml ...?> is a processing instruction. This is not the case. It is the XML declaration. You cannot produce it with createProcessingInstruction(). Trying will result in a broken output document.

The next misconception is that XML must look neat. Or that you need CDATA for anything.

Those two points might be somewhat controversial, but in general neither neat-looking XML nor CDATA fulfill any technical purpose. If your OCD permits it, get over them.

The third misconception is that "indent" was anything other than text nodes that contain only whitespace. XML retains your data, and text nodes (whitespace or not) are data. If you don't add any text nodes that only contain line breaks and spaces/tabs, then there won't be any in the output.

In short: If you want indented nodes, you must add the indentation manually. This process is commonly called "pretty-printing".

You can pretty-print a document with a recursive function like this one (getting this "right" it trickier than one might think, I cannot guarantee the output is exactly how you would do it):

' public function, pass a DOMDocument to it. modifies that document in-place.
Sub IndentDocument(doc, indentStr)
  IndentNode doc.DocumentElement, Left(indentStr, 1), Len(indentStr), 0
End Sub

' --------------------------------------------------------------------------
' helper functions, don't call directly...    
Sub IndentNode(node, indentChar, perLevel, level)
  Dim parent, child, doc

  If node.NodeType = 9 Then
    IndentNode node.DocumentElement, indentChar, perLevel, level
  ElseIf CanIndent(node) Then
    IndentRemove node
    Set doc = node.OwnerDocument
    If Not node Is doc.DocumentElement Then
      Set parent = node.ParentNode
      If node Is parent.FirstChild Or CanIndent(node.PreviousSibling) Then
        parent.InsertBefore doc.createTextNode(vbLf & String(level * perLevel, indentChar)), node
      End If
      If node Is parent.LastChild Then
        parent.InsertBefore doc.createTextNode(vbLf & String((level - 1) * perLevel, indentChar)), Nothing
      End If
    End If
    If node.ChildNodes.Length > 0 Then
      For Each child In node.ChildNodes
        IndentNode child, indentChar, perLevel, level + 1
      Next
    End If
  End If
End Sub

Function CanIndent(node)
  If node Is Nothing Then
    CanIndent = False
  Else
    CanIndent = node.NodeType = 1 Or node.NodeType = 8
  End If
End Function

Sub IndentRemove(node)
  Dim child, i

  For i = node.ChildNodes.Length To 1 Step -1
    Set child = node.ChildNodes(i - 1)
    If child.NodeType = 3 And Trim(Replace(Replace(child.Text, vbCr, ""), vbLf, "")) = "" Then
      node.RemoveChild child
    End If
    Set child = Nothing
  Next
End Sub

Usage

Set doc = CreateObject("MSXML2.DOMDocument")

' load skeleton XML document with pre-defined output encoding
doc.LoadXML "<?xml version=""1.0"" encoding=""ISO-8859-1""?><foo />"


' ... now create all kinds of nodes here ...


' indent document with two spaces and save
IndentDocument doc, "  "
doc.Save "foo.xml"

On a general note: Consider really closely if you want to use ISO-8859-1 for any new files you create. UTF-8 is the way to go these days, you should not use legacy file encodings for anything new anymore. Especially not in XML, since all XML parsers understand UTF-8.