Sanity check: 150GB XML file??? Maybe it's time to rethink the problem?!

Assuming enough disk space and patience option 1 will work.

Option 2 also has its drawbacks, e.g. "finally save it" sounds to me like keeping the file in memory... Or do you want to edit the file "in place"? Anyway, with XML files this big you probably don't want a pure Perl implementation. XML::LibXML jumps to mind. I have happy experience parsing big XML files (10s of GB) Xerces.

Cheers

Harry