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How about (be aware there's NO test1 in your data samples)
awk -F"[<>]" '
NR == FNR {T[$0]
next
}
/<id/ {TMP = $2
next
...

It doesn't print "extra" spaces, but the two leading spaces in the "id" line, which you do not remove with your sed command. Try again piping through sed -e 's/^ *<id=\"\(.*\)\">/\1/', i.e. include...