diff --git a/reactos/dll/win32/msxml3/CMakeLists.txt b/reactos/dll/win32/msxml3/CMakeLists.txt
index a9d6ab9e62a..b4e72a50705 100644
--- a/reactos/dll/win32/msxml3/CMakeLists.txt
+++ b/reactos/dll/win32/msxml3/CMakeLists.txt
@@ -1,7 +1,4 @@
 
-remove_definitions(-D_WIN32_WINNT=0x502)
-add_definitions(-D_WIN32_WINNT=0x601)
-
 add_definitions(
     -D__WINESRC__
     -D_WINE
@@ -13,9 +10,7 @@ if(MSVC)
 endif()
 
 include_directories(${REACTOS_SOURCE_DIR}/include/reactos/wine)
-
 spec2def(msxml3.dll msxml3.spec ADD_IMPORTLIB)
-
 add_typelib(msxml3_v1.idl)
 
 list(APPEND SOURCE
@@ -56,24 +51,17 @@ list(APPEND SOURCE
     ${CMAKE_CURRENT_BINARY_DIR}/msxml3_stubs.c
     ${CMAKE_CURRENT_BINARY_DIR}/msxml3.def)
 
+list(APPEND msxml3_rc_deps
+    ${CMAKE_CURRENT_SOURCE_DIR}/msxml3.manifest
+    ${CMAKE_CURRENT_SOURCE_DIR}/msxml3_v1.rgs
+    ${CMAKE_CURRENT_SOURCE_DIR}/xmlparser.rgs
+    ${CMAKE_CURRENT_BINARY_DIR}/msxml3_v1.tlb)
+
+set_source_files_properties(version.rc PROPERTIES OBJECT_DEPENDS "${msxml3_rc_deps}")
 add_library(msxml3 SHARED ${SOURCE} version.rc)
-
-if(NOT MSVC)
-    # FIXME: http://www.cmake.org/Bug/view.php?id=12998
-    #allow_warnings(msxml3)
-    set_source_files_properties(${SOURCE} PROPERTIES COMPILE_FLAGS "-Wno-error")
-endif()
-
 add_idl_headers(xmlparser_idlheader xmlparser.idl)
-add_dependencies(msxml3 xmlparser_idlheader)
-
 set_module_type(msxml3 win32dll)
-set_source_files_properties(version.rc PROPERTIES OBJECT_DEPENDS ${CMAKE_CURRENT_BINARY_DIR}/msxml3_v1.tlb)
-target_link_libraries(msxml3 libxml2 uuid wine wineldr)
-
-add_importlibs(msxml3 urlmon wininet ws2_32 comctl32 shell32 shlwapi cabinet oleaut32 ole32 version user32 gdi32 advapi32 msvcrt kernel32 ntdll)
-
-# msxml3_v1.tlb needs stdole2.tlb
-add_dependencies(msxml3 stdole2)
-
+target_link_libraries(msxml3 libxml2 uuid wine)
+add_importlibs(msxml3 urlmon ws2_32 shlwapi oleaut32 ole32 user32 msvcrt kernel32 ntdll)
+add_dependencies(msxml3 xmlparser_idlheader stdole2) # msxml3_v1.tlb needs stdole2.tlb
 add_cd_file(TARGET msxml3 DESTINATION reactos/system32 FOR all)
diff --git a/reactos/dll/win32/msxml3/attribute.c b/reactos/dll/win32/msxml3/attribute.c
index 6bd7a5809d1..b74e7183d9f 100644
--- a/reactos/dll/win32/msxml3/attribute.c
+++ b/reactos/dll/win32/msxml3/attribute.c
@@ -46,6 +46,8 @@ WINE_DEFAULT_DEBUG_CHANNEL(msxml);
 
 #ifdef HAVE_LIBXML2
 
+static const xmlChar xmlns[] = "xmlns";
+
 typedef struct _domattr
 {
     xmlnode node;
@@ -56,7 +58,7 @@ typedef struct _domattr
 static const tid_t domattr_se_tids[] = {
     IXMLDOMNode_tid,
     IXMLDOMAttribute_tid,
-    0
+    NULL_tid
 };
 
 static inline domattr *impl_from_IXMLDOMAttribute( IXMLDOMAttribute *iface )
@@ -545,8 +547,29 @@ static HRESULT WINAPI domattr_get_namespaceURI(
     BSTR* p)
 {
     domattr *This = impl_from_IXMLDOMAttribute( iface );
+    xmlNsPtr ns = This->node.node->ns;
+
     TRACE("(%p)->(%p)\n", This, p);
-    return node_get_namespaceURI(&This->node, p);
+
+    if (!p)
+        return E_INVALIDARG;
+
+    *p = NULL;
+
+    if (ns)
+    {
+        /* special case for default namespace definition */
+        if (xmlStrEqual(This->node.node->name, xmlns))
+            *p = bstr_from_xmlChar(xmlns);
+        else if (xmlStrEqual(ns->prefix, xmlns))
+            *p = SysAllocStringLen(NULL, 0);
+        else if (ns->href)
+            *p = bstr_from_xmlChar(ns->href);
+    }
+
+    TRACE("uri: %s\n", debugstr_w(*p));
+
+    return *p ? S_OK : S_FALSE;
 }
 
 static HRESULT WINAPI domattr_get_prefix(
@@ -554,8 +577,26 @@ static HRESULT WINAPI domattr_get_prefix(
     BSTR* prefix)
 {
     domattr *This = impl_from_IXMLDOMAttribute( iface );
+    xmlNsPtr ns = This->node.node->ns;
+
     TRACE("(%p)->(%p)\n", This, prefix);
-    return node_get_prefix( &This->node, prefix );
+
+    if (!prefix) return E_INVALIDARG;
+
+    *prefix = NULL;
+
+    if (ns)
+    {
+        /* special case for default namespace definition */
+        if (xmlStrEqual(This->node.node->name, xmlns))
+            *prefix = bstr_from_xmlChar(xmlns);
+        else if (ns->prefix)
+            *prefix = bstr_from_xmlChar(ns->prefix);
+    }
+
+    TRACE("prefix: %s\n", debugstr_w(*prefix));
+
+    return *prefix ? S_OK : S_FALSE;
 }
 
 static HRESULT WINAPI domattr_get_baseName(
diff --git a/reactos/dll/win32/msxml3/cdata.c b/reactos/dll/win32/msxml3/cdata.c
index cbf72cb58a2..b8d099f4347 100644
--- a/reactos/dll/win32/msxml3/cdata.c
+++ b/reactos/dll/win32/msxml3/cdata.c
@@ -55,7 +55,7 @@ typedef struct
 static const tid_t domcdata_se_tids[] = {
     IXMLDOMNode_tid,
     IXMLDOMCDATASection_tid,
-    0
+    NULL_tid
 };
 
 static inline domcdata *impl_from_IXMLDOMCDATASection( IXMLDOMCDATASection *iface )
@@ -336,7 +336,7 @@ static HRESULT WINAPI domcdata_hasChildNodes(
 {
     domcdata *This = impl_from_IXMLDOMCDATASection( iface );
     TRACE("(%p)->(%p)\n", This, ret);
-    return node_has_childnodes(&This->node, ret);
+    return return_var_false(ret);
 }
 
 static HRESULT WINAPI domcdata_get_ownerDocument(
diff --git a/reactos/dll/win32/msxml3/comment.c b/reactos/dll/win32/msxml3/comment.c
index da99fc8e483..77440a5f0f4 100644
--- a/reactos/dll/win32/msxml3/comment.c
+++ b/reactos/dll/win32/msxml3/comment.c
@@ -55,7 +55,7 @@ typedef struct _domcomment
 static const tid_t domcomment_se_tids[] = {
     IXMLDOMNode_tid,
     IXMLDOMComment_tid,
-    0
+    NULL_tid
 };
 
 static inline domcomment *impl_from_IXMLDOMComment( IXMLDOMComment *iface )
@@ -335,7 +335,7 @@ static HRESULT WINAPI domcomment_hasChildNodes(
 {
     domcomment *This = impl_from_IXMLDOMComment( iface );
     TRACE("(%p)->(%p)\n", This, ret);
-    return node_has_childnodes(&This->node, ret);
+    return return_var_false(ret);
 }
 
 static HRESULT WINAPI domcomment_get_ownerDocument(
diff --git a/reactos/dll/win32/msxml3/docfrag.c b/reactos/dll/win32/msxml3/docfrag.c
index 35cb5e3cdbf..0e9d0a1f2f0 100644
--- a/reactos/dll/win32/msxml3/docfrag.c
+++ b/reactos/dll/win32/msxml3/docfrag.c
@@ -55,7 +55,7 @@ typedef struct _domfrag
 static const tid_t domfrag_se_tids[] = {
     IXMLDOMNode_tid,
     IXMLDOMDocumentFragment_tid,
-    0
+    NULL_tid
 };
 
 static inline domfrag *impl_from_IXMLDOMDocumentFragment( IXMLDOMDocumentFragment *iface )
diff --git a/reactos/dll/win32/msxml3/domdoc.c b/reactos/dll/win32/msxml3/domdoc.c
index 9828482f5c0..03937d953b2 100644
--- a/reactos/dll/win32/msxml3/domdoc.c
+++ b/reactos/dll/win32/msxml3/domdoc.c
@@ -419,10 +419,26 @@ static void sax_characters(void *ctx, const xmlChar *ch, int len)
 
     if (ctxt->node)
     {
-        /* during domdoc_loadXML() the xmlDocPtr->_private data is not available */
+        xmlChar cur = *(ctxt->input->cur);
+
+        /* Characters are reported with multiple calls, for example each charref is reported with a separate
+           call and then parser appends it to a single text node or creates a new node if not created.
+           It's not possible to tell if it's ignorable data or not just looking at data itself cause it could be
+           space chars that separate charrefs or similar case. We only need to skip leading and trailing spaces,
+           or whole node if it has nothing but space chars, so to detect leading space node->last is checked that
+           contains text node pointer if already created, trailing spaces are detected directly looking at parser input
+           for next '<' opening bracket - similar logic is used by libxml2 itself. Basically 'cur' == '<' means the last
+           chunk of char data, in case it's not the last chunk we check for previously added node type and if it's not
+           a text node it's safe to ignore.
+
+           Note that during domdoc_loadXML() the xmlDocPtr->_private data is not available. */
+
         if (!This->properties->preserving &&
             !is_preserving_whitespace(ctxt->node) &&
-            strn_isspace(ch, len))
+            strn_isspace(ch, len) &&
+            (!ctxt->node->last ||
+            ((ctxt->node->last && (cur == '<' || ctxt->node->last->type != XML_TEXT_NODE))
+           )))
             return;
     }
 
@@ -852,7 +868,7 @@ static const tid_t domdoc_se_tids[] = {
     IXMLDOMDocument_tid,
     IXMLDOMDocument2_tid,
     IXMLDOMDocument3_tid,
-    0
+    NULL_tid
 };
 
 static HRESULT WINAPI domdoc_QueryInterface( IXMLDOMDocument3 *iface, REFIID riid, void** ppvObject )
@@ -1921,9 +1937,6 @@ static HRESULT WINAPI domdoc_createNode(
     hr = get_node_type(Type, &node_type);
     if(FAILED(hr)) return hr;
 
-    if(namespaceURI && namespaceURI[0] && node_type != NODE_ELEMENT)
-        FIXME("nodes with namespaces currently not supported.\n");
-
     TRACE("node_type %d\n", node_type);
 
     /* exit earlier for types that need name */
@@ -1966,8 +1979,26 @@ static HRESULT WINAPI domdoc_createNode(
         break;
     }
     case NODE_ATTRIBUTE:
-        xmlnode = (xmlNodePtr)xmlNewDocProp(get_doc(This), xml_name, NULL);
+    {
+        xmlChar *local, *prefix;
+
+        local = xmlSplitQName2(xml_name, &prefix);
+
+        xmlnode = (xmlNodePtr)xmlNewDocProp(get_doc(This), local ? local : xml_name, NULL);
+
+        if (local || (href && *href))
+        {
+            /* we need a floating namespace here, it can't be created linked to attribute from
+               a start */
+            xmlNsPtr ns = xmlNewNs(NULL, href, prefix);
+            xmlSetNs(xmlnode, ns);
+        }
+
+        xmlFree(local);
+        xmlFree(prefix);
+
         break;
+    }
     case NODE_TEXT:
         xmlnode = (xmlNodePtr)xmlNewDocText(get_doc(This), NULL);
         break;
@@ -2984,7 +3015,7 @@ static HRESULT WINAPI domdoc_setProperty(
              lstrcmpiW(p, PropertyResolveExternalsW) == 0)
     {
         /* Ignore */
-        FIXME("Ignoring property %s, value %d\n", debugstr_w(p), V_BOOL(&value));
+        FIXME("Ignoring property %s, value %s\n", debugstr_w(p), debugstr_variant(&value));
         return S_OK;
     }
 
diff --git a/reactos/dll/win32/msxml3/element.c b/reactos/dll/win32/msxml3/element.c
index 1cdc0f84b8b..d507b77ee49 100644
--- a/reactos/dll/win32/msxml3/element.c
+++ b/reactos/dll/win32/msxml3/element.c
@@ -61,7 +61,7 @@ static const struct nodemap_funcs domelem_attr_map;
 static const tid_t domelem_se_tids[] = {
     IXMLDOMNode_tid,
     IXMLDOMElement_tid,
-    0
+    NULL_tid
 };
 
 static inline domelem *impl_from_IXMLDOMElement( IXMLDOMElement *iface )
diff --git a/reactos/dll/win32/msxml3/entityref.c b/reactos/dll/win32/msxml3/entityref.c
index e28166ff466..57a6d3aedf0 100644
--- a/reactos/dll/win32/msxml3/entityref.c
+++ b/reactos/dll/win32/msxml3/entityref.c
@@ -55,7 +55,7 @@ typedef struct _entityref
 static const tid_t domentityref_se_tids[] = {
     IXMLDOMNode_tid,
     IXMLDOMEntityReference_tid,
-    0
+    NULL_tid
 };
 
 static inline entityref *impl_from_IXMLDOMEntityReference( IXMLDOMEntityReference *iface )
diff --git a/reactos/dll/win32/msxml3/httprequest.c b/reactos/dll/win32/msxml3/httprequest.c
index 4179368839f..5dbb4cb64f0 100644
--- a/reactos/dll/win32/msxml3/httprequest.c
+++ b/reactos/dll/win32/msxml3/httprequest.c
@@ -622,8 +622,27 @@ static HRESULT WINAPI Authenticate_Authenticate(IAuthenticate *iface,
     HWND *hwnd, LPWSTR *username, LPWSTR *password)
 {
     BindStatusCallback *This = impl_from_IAuthenticate(iface);
-    FIXME("(%p)->(%p %p %p)\n", This, hwnd, username, password);
-    return E_NOTIMPL;
+    httprequest *request = This->request;
+
+    TRACE("(%p)->(%p %p %p)\n", This, hwnd, username, password);
+
+    if (request->user && *request->user)
+    {
+        if (hwnd) *hwnd = NULL;
+        *username = CoTaskMemAlloc(SysStringByteLen(request->user)+sizeof(WCHAR));
+        *password = CoTaskMemAlloc(SysStringByteLen(request->password)+sizeof(WCHAR));
+        if (!*username || !*password)
+        {
+            CoTaskMemFree(*username);
+            CoTaskMemFree(*password);
+            return E_OUTOFMEMORY;
+        }
+
+        memcpy(*username, request->user, SysStringByteLen(request->user)+sizeof(WCHAR));
+        memcpy(*password, request->password, SysStringByteLen(request->password)+sizeof(WCHAR));
+    }
+
+    return S_OK;
 }
 
 static const IAuthenticateVtbl AuthenticateVtbl = {
@@ -706,7 +725,7 @@ static HRESULT BindStatusCallback_create(httprequest* This, BindStatusCallback *
                 heap_free(bsc);
                 return hr;
             }
-            if ((hr = SafeArrayGetUBound(sa, 1, &size) != S_OK))
+            if ((hr = SafeArrayGetUBound(sa, 1, &size)) != S_OK)
             {
                 SafeArrayUnaccessData(sa);
                 heap_free(bsc);
@@ -720,27 +739,31 @@ static HRESULT BindStatusCallback_create(httprequest* This, BindStatusCallback *
             /* fall through */
         case VT_EMPTY:
         case VT_ERROR:
+        case VT_NULL:
             ptr = NULL;
             size = 0;
             break;
         }
 
-        bsc->body = GlobalAlloc(GMEM_FIXED, size);
-        if (!bsc->body)
+        if (size)
         {
-            if (V_VT(body) == VT_BSTR)
-                heap_free(ptr);
-            else if (V_VT(body) == (VT_ARRAY|VT_UI1))
-                SafeArrayUnaccessData(sa);
+            bsc->body = GlobalAlloc(GMEM_FIXED, size);
+            if (!bsc->body)
+            {
+                if (V_VT(body) == VT_BSTR)
+                    heap_free(ptr);
+                else if (V_VT(body) == (VT_ARRAY|VT_UI1))
+                    SafeArrayUnaccessData(sa);
 
-            heap_free(bsc);
-            return E_OUTOFMEMORY;
+                heap_free(bsc);
+                return E_OUTOFMEMORY;
+            }
+
+            send_data = GlobalLock(bsc->body);
+            memcpy(send_data, ptr, size);
+            GlobalUnlock(bsc->body);
         }
 
-        send_data = GlobalLock(bsc->body);
-        memcpy(send_data, ptr, size);
-        GlobalUnlock(bsc->body);
-
         if (V_VT(body) == VT_BSTR)
             heap_free(ptr);
         else if (V_VT(body) == (VT_ARRAY|VT_UI1))
@@ -885,12 +908,6 @@ static HRESULT httprequest_open(httprequest *This, BSTR method, BSTR url,
         return hr;
     }
 
-    This->uri = uri;
-
-    VariantInit(&is_async);
-    hr = VariantChangeType(&is_async, &async, 0, VT_BOOL);
-    This->async = hr == S_OK && V_BOOL(&is_async);
-
     VariantInit(&str);
     hr = VariantChangeType(&str, &user, 0, VT_BSTR);
     if (hr == S_OK)
@@ -901,6 +918,38 @@ static HRESULT httprequest_open(httprequest *This, BSTR method, BSTR url,
     if (hr == S_OK)
         This->password = V_BSTR(&str);
 
+    /* add authentication info */
+    if (This->user && *This->user)
+    {
+        IUriBuilder *builder;
+
+        hr = CreateIUriBuilder(uri, 0, 0, &builder);
+        if (hr == S_OK)
+        {
+            IUri *full_uri;
+
+            IUriBuilder_SetUserName(builder, This->user);
+            IUriBuilder_SetPassword(builder, This->password);
+            hr = IUriBuilder_CreateUri(builder, -1, 0, 0, &full_uri);
+            if (hr == S_OK)
+            {
+                IUri_Release(uri);
+                uri = full_uri;
+            }
+            else
+                WARN("failed to create modified uri, 0x%08x\n", hr);
+            IUriBuilder_Release(builder);
+        }
+        else
+            WARN("IUriBuilder creation failed, 0x%08x\n", hr);
+    }
+
+    This->uri = uri;
+
+    VariantInit(&is_async);
+    hr = VariantChangeType(&is_async, &async, 0, VT_BOOL);
+    This->async = hr == S_OK && V_BOOL(&is_async);
+
     httprequest_setreadystate(This, READYSTATE_LOADING);
 
     return S_OK;
diff --git a/reactos/dll/win32/msxml3/main.c b/reactos/dll/win32/msxml3/main.c
index 4f18378876a..25ff33e5cbb 100644
--- a/reactos/dll/win32/msxml3/main.c
+++ b/reactos/dll/win32/msxml3/main.c
@@ -212,7 +212,7 @@ static void init_libxslt(void)
 #endif
 }
 
-BOOL WINAPI DllMain(HINSTANCE hInstDLL, DWORD fdwReason, LPVOID lpv)
+BOOL WINAPI DllMain(HINSTANCE hInstDLL, DWORD fdwReason, LPVOID reserved)
 {
     MSXML_hInstance = hInstDLL;
 
@@ -243,7 +243,6 @@ BOOL WINAPI DllMain(HINSTANCE hInstDLL, DWORD fdwReason, LPVOID lpv)
         {
             pxsltCleanupGlobals();
             wine_dlclose(libxslt_handle, NULL, 0);
-            libxslt_handle = NULL;
         }
 #endif
 #ifdef HAVE_LIBXML2
diff --git a/reactos/dll/win32/msxml3/msxml_private.h b/reactos/dll/win32/msxml3/msxml_private.h
index dc5250bb132..9f11add0b04 100644
--- a/reactos/dll/win32/msxml3/msxml_private.h
+++ b/reactos/dll/win32/msxml3/msxml_private.h
@@ -475,6 +475,15 @@ static inline HRESULT return_null_bstr(BSTR *p)
     return S_FALSE;
 }
 
+static inline HRESULT return_var_false(VARIANT_BOOL *p)
+{
+    if(!p)
+        return E_INVALIDARG;
+
+    *p = VARIANT_FALSE;
+    return S_FALSE;
+}
+
 extern IXMLDOMParseError *create_parseError( LONG code, BSTR url, BSTR reason, BSTR srcText,
                                              LONG line, LONG linepos, LONG filepos ) DECLSPEC_HIDDEN;
 extern HRESULT DOMDocument_create(MSXML_VERSION, IUnknown*, void**) DECLSPEC_HIDDEN;
diff --git a/reactos/dll/win32/msxml3/mxwriter.c b/reactos/dll/win32/msxml3/mxwriter.c
index e60a6074069..324fd8dd653 100644
--- a/reactos/dll/win32/msxml3/mxwriter.c
+++ b/reactos/dll/win32/msxml3/mxwriter.c
@@ -1,7 +1,7 @@
 /*
  *    MXWriter implementation
  *
- * Copyright 2011-2012 Nikolay Sivov for CodeWeavers
+ * Copyright 2011-2013 Nikolay Sivov for CodeWeavers
  * Copyright 2011 Thomas Mullaly
  *
  * This library is free software; you can redistribute it and/or
@@ -46,6 +46,8 @@ static const WCHAR emptyW[] = {0};
 static const WCHAR spaceW[] = {' '};
 static const WCHAR quotW[]  = {'\"'};
 static const WCHAR closetagW[] = {'>','\r','\n'};
+static const WCHAR crlfW[] = {'\r','\n'};
+static const WCHAR entityW[] = {'<','!','E','N','T','I','T','Y',' '};
 
 /* should be ordered as encoding names are sorted */
 typedef enum
@@ -149,6 +151,10 @@ typedef struct
     BOOL prop_changed;
     BOOL cdata;
 
+    BOOL text; /* last node was text node, so we shouldn't indent next node */
+    BOOL newline; /* newline was already added as a part of previous call */
+    UINT indent; /* indentation level for next node */
+
     BSTR version;
 
     BSTR encoding; /* exact property value */
@@ -457,14 +463,13 @@ static WCHAR *get_escaped_string(const WCHAR *str, escape_mode mode, int *len)
     return ret;
 }
 
-static void write_prolog_buffer(const mxwriter *This)
+static void write_prolog_buffer(mxwriter *This)
 {
     static const WCHAR versionW[] = {'<','?','x','m','l',' ','v','e','r','s','i','o','n','='};
     static const WCHAR encodingW[] = {' ','e','n','c','o','d','i','n','g','=','\"'};
     static const WCHAR standaloneW[] = {' ','s','t','a','n','d','a','l','o','n','e','=','\"'};
     static const WCHAR yesW[] = {'y','e','s','\"','?','>'};
     static const WCHAR noW[] = {'n','o','\"','?','>'};
-    static const WCHAR crlfW[] = {'\r','\n'};
 
     /* version */
     write_output_buffer(This->buffer, versionW, sizeof(versionW)/sizeof(WCHAR));
@@ -486,6 +491,7 @@ static void write_prolog_buffer(const mxwriter *This)
         write_output_buffer(This->buffer, noW, sizeof(noW)/sizeof(WCHAR));
 
     write_output_buffer(This->buffer, crlfW, sizeof(crlfW)/sizeof(WCHAR));
+    This->newline = TRUE;
 }
 
 /* Attempts to the write data from the mxwriter's buffer to
@@ -539,6 +545,41 @@ static void close_element_starttag(const mxwriter *This)
     write_output_buffer(This->buffer, gtW, 1);
 }
 
+static void write_node_indent(mxwriter *This)
+{
+    static const WCHAR tabW[] = {'\t'};
+    int indent = This->indent;
+
+    if (!This->props[MXWriter_Indent] || This->text)
+    {
+        This->text = FALSE;
+        return;
+    }
+
+    /* This is to workaround PI output logic that always puts newline chars,
+       document prolog PI does that too. */
+    if (!This->newline)
+        write_output_buffer(This->buffer, crlfW, sizeof(crlfW)/sizeof(WCHAR));
+    while (indent--)
+        write_output_buffer(This->buffer, tabW, 1);
+
+    This->newline = FALSE;
+    This->text = FALSE;
+}
+
+static inline void writer_inc_indent(mxwriter *This)
+{
+    This->indent++;
+}
+
+static inline void writer_dec_indent(mxwriter *This)
+{
+    if (This->indent) This->indent--;
+    /* depth is decreased only when element is closed, meaning it's not a text node
+       at this point */
+    This->text = FALSE;
+}
+
 static void set_element_name(mxwriter *This, const WCHAR *name, int len)
 {
     SysFreeString(This->element);
@@ -1085,8 +1126,11 @@ static HRESULT WINAPI SAXContentHandler_startElement(
     set_element_name(This, QName ? QName  : emptyW,
                            QName ? nQName : 0);
 
+    write_node_indent(This);
+
     write_output_buffer(This->buffer, ltW, 1);
     write_output_buffer(This->buffer, QName, nQName);
+    writer_inc_indent(This);
 
     if (attr)
     {
@@ -1150,6 +1194,8 @@ static HRESULT WINAPI SAXContentHandler_endElement(
          (nQName == -1 && This->class_version == MSXML6))
         return E_INVALIDARG;
 
+    writer_dec_indent(This);
+
     if (This->element)
     {
         static const WCHAR closeW[] = {'/','>'};
@@ -1160,6 +1206,7 @@ static HRESULT WINAPI SAXContentHandler_endElement(
         static const WCHAR closetagW[] = {'<','/'};
         static const WCHAR gtW[] = {'>'};
 
+        write_node_indent(This);
         write_output_buffer(This->buffer, closetagW, 2);
         write_output_buffer(This->buffer, QName, nQName);
         write_output_buffer(This->buffer, gtW, 1);
@@ -1184,6 +1231,9 @@ static HRESULT WINAPI SAXContentHandler_characters(
     close_element_starttag(This);
     set_element_name(This, NULL, 0);
 
+    if (!This->cdata)
+        This->text = TRUE;
+
     if (nchars)
     {
         if (This->cdata || This->props[MXWriter_DisableEscaping] == VARIANT_TRUE)
@@ -1233,6 +1283,7 @@ static HRESULT WINAPI SAXContentHandler_processingInstruction(
 
     if (!target) return E_INVALIDARG;
 
+    write_node_indent(This);
     write_output_buffer(This->buffer, openpiW, sizeof(openpiW)/sizeof(WCHAR));
 
     if (*target)
@@ -1245,6 +1296,7 @@ static HRESULT WINAPI SAXContentHandler_processingInstruction(
     }
 
     write_output_buffer(This->buffer, closepiW, sizeof(closepiW)/sizeof(WCHAR));
+    This->newline = TRUE;
 
     return S_OK;
 }
@@ -1384,6 +1436,7 @@ static HRESULT WINAPI SAXLexicalHandler_startCDATA(ISAXLexicalHandler *iface)
 
     TRACE("(%p)\n", This);
 
+    write_node_indent(This);
     write_output_buffer(This->buffer, scdataW, sizeof(scdataW)/sizeof(WCHAR));
     This->cdata = TRUE;
 
@@ -1414,6 +1467,7 @@ static HRESULT WINAPI SAXLexicalHandler_comment(ISAXLexicalHandler *iface, const
     if (!chars) return E_INVALIDARG;
 
     close_element_starttag(This);
+    write_node_indent(This);
 
     write_output_buffer(This->buffer, copenW, sizeof(copenW)/sizeof(WCHAR));
     if (nchars)
@@ -1526,7 +1580,6 @@ static HRESULT WINAPI SAXDeclHandler_internalEntityDecl(ISAXDeclHandler *iface,
     const WCHAR *name, int n_name, const WCHAR *value, int n_value)
 {
     mxwriter *This = impl_from_ISAXDeclHandler( iface );
-    static const WCHAR entityW[] = {'<','!','E','N','T','I','T','Y',' '};
 
     TRACE("(%p)->(%s:%d %s:%d)\n", This, debugstr_wn(name, n_name), n_name,
         debugstr_wn(value, n_value), n_value);
@@ -1551,10 +1604,39 @@ static HRESULT WINAPI SAXDeclHandler_externalEntityDecl(ISAXDeclHandler *iface,
     const WCHAR *name, int n_name, const WCHAR *publicId, int n_publicId,
     const WCHAR *systemId, int n_systemId)
 {
+    static const WCHAR publicW[] = {'P','U','B','L','I','C',' '};
+    static const WCHAR systemW[] = {'S','Y','S','T','E','M',' '};
     mxwriter *This = impl_from_ISAXDeclHandler( iface );
-    FIXME("(%p)->(%s:%d %s:%d %s:%d): stub\n", This, debugstr_wn(name, n_name), n_name,
+
+    TRACE("(%p)->(%s:%d %s:%d %s:%d)\n", This, debugstr_wn(name, n_name), n_name,
         debugstr_wn(publicId, n_publicId), n_publicId, debugstr_wn(systemId, n_systemId), n_systemId);
-    return E_NOTIMPL;
+
+    if (!name) return E_INVALIDARG;
+    if (publicId && !systemId) return E_INVALIDARG;
+    if (!publicId && !systemId) return E_INVALIDARG;
+
+    write_output_buffer(This->buffer, entityW, sizeof(entityW)/sizeof(WCHAR));
+    if (n_name) {
+        write_output_buffer(This->buffer, name, n_name);
+        write_output_buffer(This->buffer, spaceW, sizeof(spaceW)/sizeof(WCHAR));
+    }
+
+    if (publicId)
+    {
+        write_output_buffer(This->buffer, publicW, sizeof(publicW)/sizeof(WCHAR));
+        write_output_buffer_quoted(This->buffer, publicId, n_publicId);
+        write_output_buffer(This->buffer, spaceW, sizeof(spaceW)/sizeof(WCHAR));
+        write_output_buffer_quoted(This->buffer, systemId, n_systemId);
+    }
+    else
+    {
+        write_output_buffer(This->buffer, systemW, sizeof(systemW)/sizeof(WCHAR));
+        write_output_buffer_quoted(This->buffer, systemId, n_systemId);
+    }
+
+    write_output_buffer(This->buffer, closetagW, sizeof(closetagW)/sizeof(WCHAR));
+
+    return S_OK;
 }
 
 static const ISAXDeclHandlerVtbl SAXDeclHandlerVtbl = {
@@ -1612,6 +1694,9 @@ HRESULT MXWriter_create(MSXML_VERSION version, IUnknown *outer, void **ppObj)
 
     This->element = NULL;
     This->cdata = FALSE;
+    This->indent = 0;
+    This->text = FALSE;
+    This->newline = FALSE;
 
     This->dest = NULL;
     This->dest_written = 0;
@@ -1806,11 +1891,32 @@ static HRESULT WINAPI MXAttributes_clear(IMXAttributes *iface)
     return S_OK;
 }
 
+static mxattribute *get_attribute_byindex(mxattributes *attrs, int index)
+{
+    if (index < 0 || index >= attrs->length) return NULL;
+    return &attrs->attr[index];
+}
+
 static HRESULT WINAPI MXAttributes_removeAttribute(IMXAttributes *iface, int index)
 {
     mxattributes *This = impl_from_IMXAttributes( iface );
-    FIXME("(%p)->(%d): stub\n", This, index);
-    return E_NOTIMPL;
+    mxattribute *dst;
+
+    TRACE("(%p)->(%d)\n", This, index);
+
+    if (!(dst = get_attribute_byindex(This, index))) return E_INVALIDARG;
+
+    /* no need to remove last attribute, just make it inaccessible */
+    if (index + 1 == This->length)
+    {
+        This->length--;
+        return S_OK;
+    }
+
+    memmove(dst, dst + 1, (This->length-index-1)*sizeof(*dst));
+    This->length--;
+
+    return S_OK;
 }
 
 static HRESULT WINAPI MXAttributes_setAttribute(IMXAttributes *iface, int index,
@@ -1833,29 +1939,61 @@ static HRESULT WINAPI MXAttributes_setLocalName(IMXAttributes *iface, int index,
     BSTR localName)
 {
     mxattributes *This = impl_from_IMXAttributes( iface );
-    FIXME("(%p)->(%d %s): stub\n", This, index, debugstr_w(localName));
-    return E_NOTIMPL;
+    mxattribute *attr;
+
+    TRACE("(%p)->(%d %s)\n", This, index, debugstr_w(localName));
+
+    if (!(attr = get_attribute_byindex(This, index))) return E_INVALIDARG;
+
+    SysFreeString(attr->local);
+    attr->local = SysAllocString(localName);
+
+    return S_OK;
 }
 
 static HRESULT WINAPI MXAttributes_setQName(IMXAttributes *iface, int index, BSTR QName)
 {
     mxattributes *This = impl_from_IMXAttributes( iface );
-    FIXME("(%p)->(%d %s): stub\n", This, index, debugstr_w(QName));
-    return E_NOTIMPL;
+    mxattribute *attr;
+
+    TRACE("(%p)->(%d %s)\n", This, index, debugstr_w(QName));
+
+    if (!(attr = get_attribute_byindex(This, index))) return E_INVALIDARG;
+
+    SysFreeString(attr->qname);
+    attr->qname = SysAllocString(QName);
+
+    return S_OK;
 }
 
 static HRESULT WINAPI MXAttributes_setURI(IMXAttributes *iface, int index, BSTR uri)
 {
     mxattributes *This = impl_from_IMXAttributes( iface );
-    FIXME("(%p)->(%d %s): stub\n", This, index, debugstr_w(uri));
-    return E_NOTIMPL;
+    mxattribute *attr;
+
+    TRACE("(%p)->(%d %s)\n", This, index, debugstr_w(uri));
+
+    if (!(attr = get_attribute_byindex(This, index))) return E_INVALIDARG;
+
+    SysFreeString(attr->uri);
+    attr->uri = SysAllocString(uri);
+
+    return S_OK;
 }
 
 static HRESULT WINAPI MXAttributes_setValue(IMXAttributes *iface, int index, BSTR value)
 {
     mxattributes *This = impl_from_IMXAttributes( iface );
-    FIXME("(%p)->(%d %s): stub\n", This, index, debugstr_w(value));
-    return E_NOTIMPL;
+    mxattribute *attr;
+
+    TRACE("(%p)->(%d %s)\n", This, index, debugstr_w(value));
+
+    if (!(attr = get_attribute_byindex(This, index))) return E_INVALIDARG;
+
+    SysFreeString(attr->value);
+    attr->value = SysAllocString(value);
+
+    return S_OK;
 }
 
 static const IMXAttributesVtbl MXAttributesVtbl = {
diff --git a/reactos/dll/win32/msxml3/node.c b/reactos/dll/win32/msxml3/node.c
index f52026e8668..53efb61cc43 100644
--- a/reactos/dll/win32/msxml3/node.c
+++ b/reactos/dll/win32/msxml3/node.c
@@ -153,7 +153,7 @@ static HRESULT WINAPI SupportErrorInfo_InterfaceSupportsErrorInfo(ISupportErrorI
     TRACE("(%p)->(%s)\n", This, debugstr_guid(riid));
 
     tid = This->iids;
-    while (*tid)
+    while (*tid != NULL_tid)
     {
         if (IsEqualGUID(riid, get_riid_from_tid(*tid)))
             return S_OK;
@@ -899,6 +899,50 @@ HRESULT node_get_xml(xmlnode *This, BOOL ensure_eol, BSTR *ret)
     return *ret ? S_OK : E_OUTOFMEMORY;
 }
 
+/* duplicates xmlBufferWriteQuotedString() logic */
+static void xml_write_quotedstring(xmlOutputBufferPtr buf, const xmlChar *string)
+{
+    const xmlChar *cur, *base;
+
+    if (xmlStrchr(string, '\"'))
+    {
+        if (xmlStrchr(string, '\''))
+        {
+	    xmlOutputBufferWrite(buf, 1, "\"");
+            base = cur = string;
+
+            while (*cur)
+            {
+                if (*cur == '"')
+                {
+                    if (base != cur)
+                        xmlOutputBufferWrite(buf, cur-base, (const char*)base);
+                    xmlOutputBufferWrite(buf, 6, "&quot;");
+                    cur++;
+                    base = cur;
+                }
+                else
+                    cur++;
+            }
+            if (base != cur)
+                xmlOutputBufferWrite(buf, cur-base, (const char*)base);
+	    xmlOutputBufferWrite(buf, 1, "\"");
+	}
+        else
+        {
+	    xmlOutputBufferWrite(buf, 1, "\'");
+            xmlOutputBufferWriteString(buf, (const char*)string);
+	    xmlOutputBufferWrite(buf, 1, "\'");
+        }
+    }
+    else
+    {
+        xmlOutputBufferWrite(buf, 1, "\"");
+        xmlOutputBufferWriteString(buf, (const char*)string);
+        xmlOutputBufferWrite(buf, 1, "\"");
+    }
+}
+
 static void htmldtd_dumpcontent(xmlOutputBufferPtr buf, xmlDocPtr doc)
 {
     xmlDtdPtr cur = doc->intSubset;
@@ -908,17 +952,17 @@ static void htmldtd_dumpcontent(xmlOutputBufferPtr buf, xmlDocPtr doc)
     if (cur->ExternalID)
     {
         xmlOutputBufferWriteString(buf, " PUBLIC ");
-        xmlBufferWriteQuotedString(buf->buffer, cur->ExternalID);
+        xml_write_quotedstring(buf, cur->ExternalID);
         if (cur->SystemID)
         {
             xmlOutputBufferWriteString(buf, " ");
-            xmlBufferWriteQuotedString(buf->buffer, cur->SystemID);
+            xml_write_quotedstring(buf, cur->SystemID);
 	}
     }
     else if (cur->SystemID)
     {
         xmlOutputBufferWriteString(buf, " SYSTEM ");
-        xmlBufferWriteQuotedString(buf->buffer, cur->SystemID);
+        xml_write_quotedstring(buf, cur->SystemID);
     }
     xmlOutputBufferWriteString(buf, ">\n");
 }
@@ -946,6 +990,15 @@ static void htmldoc_dumpcontent(xmlOutputBufferPtr buf, xmlDocPtr doc)
     doc->type = type;
 }
 
+static const xmlChar *get_output_buffer_content(xmlOutputBufferPtr output)
+{
+#ifdef LIBXML2_NEW_BUFFER
+    return xmlOutputBufferGetContent(output);
+#else
+    return xmlBufferContent(output->buffer);
+#endif
+}
+
 HRESULT node_transform_node(const xmlnode *This, IXMLDOMNode *stylesheet, BSTR *p)
 {
 #ifdef SONAME_LIBXSLT
@@ -974,7 +1027,7 @@ HRESULT node_transform_node(const xmlnode *This, IXMLDOMNode *stylesheet, BSTR *
                 if (output)
                 {
                     htmldoc_dumpcontent(output, result->doc);
-                    content = xmlBufferContent(output->buffer);
+                    content = get_output_buffer_content(output);
                     *p = bstr_from_xmlChar(content);
                     xmlOutputBufferClose(output);
                 }
diff --git a/reactos/dll/win32/msxml3/pi.c b/reactos/dll/win32/msxml3/pi.c
index 73a318c4bf0..e846e32be6c 100644
--- a/reactos/dll/win32/msxml3/pi.c
+++ b/reactos/dll/win32/msxml3/pi.c
@@ -57,7 +57,7 @@ static const struct nodemap_funcs dom_pi_attr_map;
 static const tid_t dompi_se_tids[] = {
     IXMLDOMNode_tid,
     IXMLDOMProcessingInstruction_tid,
-    0
+    NULL_tid
 };
 
 static inline dom_pi *impl_from_IXMLDOMProcessingInstruction( IXMLDOMProcessingInstruction *iface )
diff --git a/reactos/dll/win32/msxml3/saxreader.c b/reactos/dll/win32/msxml3/saxreader.c
index 9fb17120423..241f681a59c 100644
--- a/reactos/dll/win32/msxml3/saxreader.c
+++ b/reactos/dll/win32/msxml3/saxreader.c
@@ -1268,6 +1268,49 @@ static const struct ISAXAttributesVtbl isaxattributes_vtbl =
     isaxattributes_getValueFromQName
 };
 
+/* Libxml2 escapes '&' back to char reference '&#38;' in attribute value,
+   so when document has escaped value with '&amp;' it's parsed to '&' and then
+   escaped to '&#38;'. This function takes care of ampersands only. */
+static BSTR saxreader_get_unescaped_value(const xmlChar *buf, int len)
+{
+    static const WCHAR ampescW[] = {'&','#','3','8',';',0};
+    WCHAR *dest, *ptrW, *str;
+    DWORD str_len;
+    BSTR bstr;
+
+    if (!buf)
+        return NULL;
+
+    str_len = MultiByteToWideChar(CP_UTF8, 0, (LPCSTR)buf, len, NULL, 0);
+    if (len != -1) str_len++;
+
+    str = heap_alloc(str_len*sizeof(WCHAR));
+    if (!str) return NULL;
+
+    MultiByteToWideChar(CP_UTF8, 0, (LPCSTR)buf, len, str, str_len);
+    if (len != -1) str[str_len-1] = 0;
+
+    ptrW = str;
+    while ((dest = strstrW(ptrW, ampescW)))
+    {
+        WCHAR *src;
+
+        /* leave first '&' from a reference as a value */
+        src = dest + (sizeof(ampescW)/sizeof(WCHAR) - 1);
+        dest++;
+
+        /* move together with null terminator */
+        memmove(dest, src, (strlenW(src) + 1)*sizeof(WCHAR));
+
+        ptrW++;
+    }
+
+    bstr = SysAllocString(str);
+    heap_free(str);
+
+    return bstr;
+}
+
 static HRESULT SAXAttributes_populate(saxlocator *locator,
         int nb_namespaces, const xmlChar **xmlNamespaces,
         int nb_attributes, const xmlChar **xmlAttributes)
@@ -1320,8 +1363,7 @@ static HRESULT SAXAttributes_populate(saxlocator *locator,
             attrs[i].szURI = find_element_uri(locator, xmlAttributes[i*5+2]);
 
         attrs[i].szLocalname = bstr_from_xmlChar(xmlAttributes[i*5]);
-        attrs[i].szValue = bstr_from_xmlCharN(xmlAttributes[i*5+3],
-                xmlAttributes[i*5+4]-xmlAttributes[i*5+3]);
+        attrs[i].szValue = saxreader_get_unescaped_value(xmlAttributes[i*5+3], xmlAttributes[i*5+4]-xmlAttributes[i*5+3]);
         attrs[i].szQName = QName_from_xmlChar(xmlAttributes[i*5+1],
                 xmlAttributes[i*5]);
     }
diff --git a/reactos/dll/win32/msxml3/text.c b/reactos/dll/win32/msxml3/text.c
index efc79e547e1..68a40085f3a 100644
--- a/reactos/dll/win32/msxml3/text.c
+++ b/reactos/dll/win32/msxml3/text.c
@@ -333,7 +333,7 @@ static HRESULT WINAPI domtext_hasChildNodes(
 {
     domtext *This = impl_from_IXMLDOMText( iface );
     TRACE("(%p)->(%p)\n", This, ret);
-    return node_has_childnodes(&This->node, ret);
+    return return_var_false(ret);
 }
 
 static HRESULT WINAPI domtext_get_ownerDocument(
diff --git a/reactos/dll/win32/msxml3/version.rc b/reactos/dll/win32/msxml3/version.rc
index 497bdaf98e0..c6e46c693b2 100644
--- a/reactos/dll/win32/msxml3/version.rc
+++ b/reactos/dll/win32/msxml3/version.rc
@@ -22,7 +22,7 @@
 #define WINE_PRODUCTVERSION_STR "8.90.1101.0"
 #define WINE_EXTRAVALUES VALUE "OLESelfRegister",""
 
-#include "wine/wine_common_ver.rc"
+#include <wine/wine_common_ver.rc>
 
 /* @makedep: msxml3.manifest */
 WINE_MANIFEST 24 msxml3.manifest
diff --git a/reactos/media/doc/README.WINE b/reactos/media/doc/README.WINE
index 32df320ed16..0ae78b1294a 100644
--- a/reactos/media/doc/README.WINE
+++ b/reactos/media/doc/README.WINE
@@ -132,7 +132,7 @@ reactos/dll/win32/msvfw32         # Synced to Wine-1.7.1
 reactos/dll/win32/msvidc32        # Synced to Wine-1.7.1
 reactos/dll/win32/msxml           # Synced to Wine-1.5.19
 reactos/dll/win32/msxml2          # Synced to Wine-1.5.19
-reactos/dll/win32/msxml3          # Synced to Wine-1.5.26
+reactos/dll/win32/msxml3          # Synced to Wine-1.7.1
 reactos/dll/win32/msxml4          # Synced to Wine-1.5.19
 reactos/dll/win32/msxml6          # Synced to Wine-1.5.19
 reactos/dll/win32/nddeapi         # Synced to Wine-1.5.19