Make sure your Control Panel is set to 'Edit' (radio button at the top left).

Yep,

DNN combines the html and xml files into a single ascx file and use this as the live skin. It does this only upon upload or when you click that Parse-skin link. It will always overwrite any ascx files it had previously created.

Once you have figured out how all this works, you can bypass html skinning and simply alter the ascx file directly on the server. Then just refresh the browser to see your changes. If you are modifying the ascx file then it is smart to remove any html and xml files so that you don't accidentally parse them again and wipe out your changes.

If you're using an editor like Expression, or Dreamweaver to edit the live files, it is pretty much the same level of wysiwyg as you get with html.. so eventually you might just do the ascx thing. Adding attributes to the tags is also more intuitive and immediate than trying to work in a separate xml file.

This page lists all the attributes; http://www.thinkofdesign.com/resources/reference.html
(click on the dar gray bars to see the full inormation - it's not very obvious)

Rob