I sometimes also have problems with Beautify, where in certain xhtml pages, it does nothing.
The culprit is a set of empty <div class="something"></div> tags either just below the <body> tag or below the heading tags.
Once I delete these tags, beautify works as per normal. Next time I come across a book with that issue, I'll scramble it and upload it if anybody is interested in checking out why it does that.