First of all you should use a well-formed xml.
If your XML is well-formed you should check some XML Parsing Tutorial.
Like this one: http://www.sitepoint.com/print/560
Eventhough it's written to parse an rss feed, you can use the same idea
for parsing your files.
Constantin Wolber
Isn't it simply a question of having a variable $category that would be updateted each time you have a line starting with <CATEGORY?
<<?xml version="1.0" ?>
<STOREITEMS>
<CREATED value="Wed Mar 15 8:07:27 GMT 2006">
<CATEGORY id='67' name='Herbal Pharmacy'>
<PRODUCT ITEM='603'>
<NAME></NAME>
<MODEL></MODEL>
<PRICE></PRICE>
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