/(<\/?)(\w+):([^>]*>)/", "$1$2$3", "

The other factor maybe – I am just spit balling – it the structure is not what simpleXML is expecting. Changing the pointer seems to work so instead of simplexml only seeing two nodes and passing this through foreach twice it see all the children.
For me the pointer was: $xml->soapBody->PostAdvert->Adverts

Anyone wants to expand on this and make sense feel free, code below:

$src = fopen(“original_file.txt”, “r”);
if (!$src) {
die(“Failed to open the files”);
}
$dest = fopen(“write_to_file.xml”, “w”);
if (!$dest) {
die(“Failed to open the files”);
}
while (!feof($src)) {
echo “Starting preg_replace”;
$data = fgets($src);
$xmlString = preg_replace(“/(]*>)/”, “$1$2$3″, $data);

fwrite($dest, $xmlString);
}
fclose($src);
fclose($dest);

// Load your preg_replaced to simplexml
$xml = load_xml_file(“write_to_file.xml”);

// Set the level at which the xml is read (I think)
$result = $xml->soapBody->Start_node->Whatever_it_may_be;

// Extract children
foreach($result->children() as $child) {
$child->child_node;
}