Um, it does. Using the example code from the saveXML() manual page:
$doc = new DOMDocument('1.0');
// we want a nice output
$doc->formatOutput = true;
$root = $doc->createElement('book');
$root = $doc->appendChild($root);
$title = $doc->createElement('title');
$title = $root->appendChild($title);
$text = $doc->createTextNode('This is the title');
$text = $title->appendChild($text);
echo "Retrieving all the document:\n";
echo $doc->saveXML() . "\n";
echo "Retrieving only the title part:\n";
echo $doc->saveXML($title);
The output (I get, anyway) matches the example output:
Retrieving all the document:
<?xml version="1.0"?>
<book>
<title>This is the title</title>
</book>
Retrieving only the title part:
<title>This is the title</title>
Note that the <title> node is indented, and there are linebreaks.