xmllint returns correct output - So I am suspecting mod_proxy_html.
Will check more and post.
C:\libxml2-2.6.17.win32\bin>xmllint --html tst.htm
<!DOCTYPE html PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN"
"http://www.w3.org
/TR/REC-html40/loose.dtd">
<html>
<head></head>
<body><form action="proxyTarget.asp" method="GET">
This site has following structure
ROOT DIRECTORY
-> Include directory
-> Bin directory
-> CSS directory
<a href="Include/includeTest.asp">Include/includeTest.asp</a>
<br><a
href="/proxyTest/Include/includeTest.asp">/proxytest/Include/incl
udeTest.asp</a>
<br><a
href="http://localhost/proxyTest/Include/includeTest.asp">http://
localhost/proxytest/Include/includeTest.asp</a>
<br><br>
NOW WE WILL TEST SPAN
<span>END OF SPAN </span>
BR
<span> end of span </span>
BR
<span> end of span <!-- </span -->
<font type="arial"> hhh </font>
<input type="SUBMIT" name="mode" value="transfer"><input
type="SUBMIT" n
ame="mode" value="redirect"><input type="SUBMIT" name="mode"
value="aredirect"><
input type="SUBMIT" name="mode" value="atransfer"></span>
</form></body>
</html>