Hi @Dan the undo problem seem to have been fixed in newer version of indent by fold...
If the TextFX menu does not exist, you need to download & install the plugin. Plugins->Plugin Manager->Show Plugin Manager and then check the plugin TextFX Characters. Click 'install,' restart Notepad++.
In version Notepad++ v6.1.3, I resolve with:
Plugin Manager->Show Plugin Manager** and then check the plugin "Indent By Fold"
Indent by fold is awesome. The fact that it works in arbitrary formatting (XML, C/++/#, etc.) is great. Only problem with it is the "undo" stack. When used, if you wish to undo to a point before when you indented, you have to undo through every line re-indentation, as it doesn't get added to the stack as a single command. Basically, be careful when working with long files.