David Carlisle wrote:
<xsl:variable name="newline" select=" '
' " />
    
2nd one, not the 1st (which is equivalent to <xsl:variable
name="newline"/>
  
Oops!
(side note:)
I tend to solve my own whitespace problems with character maps, so that 
I can use a private use character everywhere in my code. That way I do 
not need to think about the whitespace removal of the stylesheet:
inside a stylesheet dtd:
<!ENTITY newline "&#x0A;" >
<!ENTITY newline_substitute "" >   <!-- mapped to newline -->
<!ENTITY nsub "&newline_substitute;" >     <!-- alias -->
the xslt:
<?xml version="1.0" encoding="UTF-8"?>
<!DOCTYPE xsl:stylesheet SYSTEM 
"../../xslt-common/dtd/webitor-transformation.dtd" >
<xsl:stylesheet
   version                    = "2.0"
   xmlns:xsl                = "http://www.w3.org/1999/XSL/Transform" >
   <xsl:character-map name="substitutes">
       <xsl:output-character character="&newline_substitute;" 
string="&newline;"/>
   </xsl:character-map>
   <xsl:output use-character-map="substitutes" />
   <xsl:template match="/">
       <xsl:value-of select=" '⊄' " />
   </xsl:template>
</xsl:stylesheet>
In the example above there is no reason at all of course for using 
&nbsub; instead of 
 unless for readability (but you could use 
&newline; too). However, when passing around variables, doing copy-of, 
value-of etc, or even a normalice-space, you can loose the newlines. 
This way you can preserve them more easily and, the better part, when I 
place an ⊄ anywhere, it will always be output (which is not so for 

)
There are other possibilities that have to do with linebreaking and 
proper indentation that are otherwise hard to achieve or may get lost in 
parameter passing as value-of instead of copy-of etc., but I am drifting 
too far away now from the OP's question....
(I wonder if this technique is used by others, too and for what 
purposes; I use similar tricks for easier handling of quote-escapes in 
source documents and outputting tab characters for indentation when 
normal indentation does not suffice)
-- Abel Braaksma