Powershell scipt for replacing a line in every file in directory doesn't work

Generally speaking, it's worth heeding zett42's advice: For processing XML files, it is more robust to use a dedicated XML parser, notably [xml] (System.Xml.XmlDocument).

If plain-text processing is an option - and it sounds like it is for you - you can use the following approach, which updates all files in place; it is optimized for performance:

Get-ChildItem –LiteralPath C:\test-XML\XML -Recurse -Filter *.xml |
  ForEach-Object {
    # CAUTION: This updates files *in place*.
    #          Adjust the encoding as needed.
    Set-Content -Encoding Utf8 $_.FullName -Value (
      (Get-Content -Raw $_.FullName) -replace '<package>true</package>', '<package>false</package>'
    )
  }

Note:

• The primary problem with your code was presumably just a typo: <packag> -> <package>.

• The file content is updated in place, so it's best to back up the files first, to be safe. There's a hypothetical risk of file corruption if the process of writing back the updated content gets interrupted.

• For efficiency, Get-Content -Raw reads the entire file into a single, multi-line string (the default behavior is to output an array of lines, which is much slower), so that only a single -replace operation is needed. If nothing matches in the input string, it is returned as-is.

• Note that PowerShell always uses a file-writing cmdlet's default character encoding on output, irrespective of the encoding that the input file uses, hence the explicit use of Set-Content's
  -Encoding parameter.

  • See this answer for more information about default encodings in Windows PowerShell vs. PowerShell [Core] v6+.

• Note that the updated content is passed to Set-Content -Value parameter rather than via the pipeline ($content | Set-Content ...); while it makes little difference in performance here, given that only one string is passed, with array-of-lines processing it would: if, say, $content contains the array of lines to write to file, Set-Content ... -Value $content will be much faster than $content | Set-Content ...

• For brevity, the Set-Content and Get-Content call pass the filename argument positionally, which implicitly binds to the -Path parameter, which, strictly speaking, accepts wildcard patterns; typically, that works as expected even if you pass a literal filename, but the more robust approach is to use the -LiteralPath parameter, as shown in the Get-ChildItem call above; specifically, literal filenames that contain [ and ] result in misinterpretation by the -Path parameter, except if they're escaped .