Question on CursorToXml

In synchronizing multiple locations, I have been sending changes by means
of using Cursortoxml('alias','output',3,0+4+8,0,"1") packets.

I am really not sure why one would use outputformat's 1 or 2? Can anyone give me examples of when they should be used?

Also I have been using the 0+4+8 flag values. What are the advantages or disadvantages to preserving white space in fields and wrap the memo fields with CDATA sections.

Thanks for any insight on the correct way or explanation of what each should be used for.