ok, without seeing more of the actual xml it is hard for me to comment on that.

However, have you seen this thread:

http://www.sqlservercentral.com/Forums/Topic1311855-21-1.aspx#bm1312389

I came up with this for someone who had similar requirements to yourself, but this adds a new attribute into every node rather than an element. It could be adapted to add an element instead. If nothing else, it may give you some further ideas on how you could achieve your requirements.