Here's a simple way to do it with a minimum amount of loopiness (don't forget to use 'try-except' or 'with' in real life):
f = open("item1.txt")
for preline in f:
if "Item 1" in preline:
print preline,
for goodline in f:
# could put an end condition with a 'break' here
print goodline,
f.close()
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