By considering the cross phase modulation (XPM) between the two orthogonal poparization components, the nonlinear birefringence and nonlinear polarization evolution (NPE) in highly-nonlinear fiber (HNLF), as well as the unequal evolutions of the state of polarization (SOP) between the clockwise (CW) and counter-clockwise (CCW) waves in a nonlinear amplifying loop mirror (NALM) are analyzed. It is pointed out that the traditional cosine expression is no longer valid for the power transmission of NALM due to uncompleted interference under the high power condition. The analytical expression considering NPE effect is derived, and the experimental result is presented.