This week's book giveaway is in the OO, Patterns, UML and Refactoring forum. We're giving away four copies of Refactoring for Software Design Smells: Managing Technical Debt and have Girish Suryanarayana, Ganesh Samarthyam & Tushar Sharma on-line! See this thread for details.
JDOM has a "pretty" format you can get using Format.getPrettyFormat(). You can then use that in an XMLOutputter instance. The biggest drawback is, however, that it requires you to put the entire XML document into your memory as a org.jdom.Document. Check out JDOM's SAXBuilder for creating a Document from a file or other source.