Update: this was answered by @Brett Saviano on the GitHub discussion forum for the VS Code extension: Should the extension change line feeds on compilation? · intersystems-community/vscode-objectscript · Discussion #1495
 

With help from WRC, looks like this is something of our own doing - we were using sub-transforms in ways that caused us problems. Our sub-transforms above were outputting whole new XML documents, when at the very least they should have been taking existing partially produced XML from the top-level transform and using that existing document to output. We "solved" the node ordering issue by moving everything into a single transform, so there was no mismatch between top level and sub-transforms.