Hi people,
During the ongoing discussion about XSLT 2 today and considering/not 
considering the switch, I thought: why isn't there a nice 
all-encompassing example that shows the merits of XSLT 2 over XSLT 1? 
It'll come as no surprise that there's no trivial answer to that, so I 
figured: why not ask the masses (some people claim that the masses are 
always right, though that is debatable).
The target audience is: XSLT 1 users that would like to know more / 
understand more of XSLT 2 and are considering the switch.
Before we start discussing the template itself, let me throw in some rules:
    1. The template must be 100% compliant to the REC
    2. There can be no extensions used of whatever kind
    3. The template must be rather simple, easy, explainable.
    4. It must be run on itself (i.e., no hassle with input files etc)
    5. It must show some key concepts, without showing too much detail
    6. Does not use functions that call or write resources 
(xsl:result-document, unparsed-text etc)
    7. (optional) it should be runnable on the available xslt 2 processors
Apart from (6) and (7), I think it is fairly trivial. I put in (7) so 
that people that want to see other tools in action (Saxon, Gestalt, 
Altova) can see them in action (it follows that this means no SA 
behavior, sorry). I put in (6) to keep the example rather trivial. If 
users of mentioned and/or missing tools would be so kind as to answer 
with a one-liner to call the template below from a command line?
About the details that should be in the example. I thought of a nice 
example that can possibly be made infinitely better. Consider it a first 
draft, and I invite everyone to shoot at it (you may even blast it away ;)
This what I put in so far:
  a) badly designed xml as input (in a variable, see rule 4)
  b) a micro pipeline
  c) for-each-group based on value to show groups without Muenchian
  d) xsl:function for camelcasing a string
  e) ranges, like "2 to 3" and comparison
  f) tokenize() and matches()
  g) for ... in .... return
  h) next-match
  i) the use of the 'as' attribute on basic processors
The example is rather trivial (it should be, I believe). It takes a list 
of users of XSLT products, and groups them per product:
 <james-johnsson>Saxon, c, xslt 2</james-johnsson>
 <super-troopers>xsltproc, nc, xslt 1</super-troopers>
Here: the node name is the user. Then follows a CSV string. The first 
part is the processor, the second says Compliant or NonCompliant, the 
third says the language (I am pretty sure the input is not correct, 
sorry about my lack of knowledge of the compliancy level).
The output groups per processor as follows, where some processing is 
done on the strings and the users are comma-concatenated under <users>:
<processor name="Xsltproc">
  <level>processor is non-compliant</level>
  <language>XSLT 1</language>
  <users>George Williams Geraldson, Super Troopers</users>
</processor>
I understand this is a rather superficial example. If anybody can make 
it better, clearer, input is welcome. Keep in mind that it should be 
kept easy as well as showing the power of XSLT 2 (so it can be used as a 
showcase).
Here's the XSLT so far, any ideas, complaints, suggestions, rewrites, 
opinions etc are welcome:
<xsl:stylesheet
   xmlns:xsl="http://www.w3.org/1999/XSL/Transform"
   xmlns:xs = "http://www.w3.org/2001/XMLSchema"
   xmlns:my = "urn:my"
   version="2.0"
   exclude-result-prefixes="#all">
   <xsl:output indent="yes" />
  
   <!--
       the input, just in a variable
       ready to use, easy for testing, no need
       for exslt:node-set()
   -->
   <xsl:variable name="preferences">
       <james-johnsson>Saxon, c, xslt 2</james-johnsson>
       <george-williams-geraldson>xsltproc, nc, xslt 
1</george-williams-geraldson>
       <super-troopers>xsltproc, nc, xslt 1</super-troopers>
       <merry-mirriams>libxslt, nc, xslt 1</merry-mirriams>
       <john-ronald-reuel-tolkien>saxon, c, xslt 
2</john-ronald-reuel-tolkien>
       <sir-tomald-richards>gestAlt, nc, XSLT 2</sir-tomald-richards>
       <agatha-kirsten>saxon, c, xslt 2</agatha-kirsten>
       <mollie-jollie>saxon, c, xslt 2</mollie-jollie>
   </xsl:variable>
  
   <xsl:template match="/" name="main">
       <xsl:variable name="micro-pipeline">
           <xsl:apply-templates select="$preferences/*" />
       </xsl:variable>
      
       <!-- group by processor -->
       <xsl:for-each-group
           select="$micro-pipeline/processor"
           group-by="token[1]/upper-case(text())">
          
           <processor name="{my:camel-case(token[1])}" >
               <xsl:apply-templates select="token[position() = 2 to 3]" />
               <users>
                   <!--
                       join the users in one string
                       and camel case their names
                   -->
                   <xsl:value-of select="
                       string-join(
                       my:camel-case(current-group()/user)
                       , ', ')" />
               </users>
           </processor>           
       </xsl:for-each-group>
      
   </xsl:template>
  
   <!--
       matches for $preferences nodes
   -->
   <xsl:template match="*" priority="0">
       <processor>
           <xsl:next-match />
       </processor>
   </xsl:template>
   <xsl:template match="*">
       <user><xsl:value-of select="local-name(.)" /></user>
       <xsl:next-match />
   </xsl:template>
  
  
   <xsl:template match="text()">
       <xsl:for-each select="tokenize(., ',')">
           <token><xsl:value-of select="normalize-space(.)" /></token>
       </xsl:for-each>
   </xsl:template>
  
  
   <!--
       what follows: matches for micro pipeline
       all matches are case-insensitive, with no
       need for translate() and trouble with more complex
       characters
   -->
   <xsl:template match="token[matches(., '^c$', 'i')]">
       <level>processor is compliant</level>
   </xsl:template>
  
   <xsl:template match="token[matches(., '^nc$', 'i')]">
       <level>processor is non-compliant</level>
   </xsl:template>
  
   <xsl:template match="token[matches(., '^xslt', 'i')]">
       <language><xsl:value-of select="upper-case(.)" /></language>
   </xsl:template>
  
   <!--
       put the nasty bit aside in a function
       it camel-cases a dashed or space delimited string
   -->
   <xsl:function name="my:camel-case" as="xs:string*">
       <xsl:param name="string" as="xs:string*"/>
       <xsl:sequence select="for $s in $string
           return string-join(
               for $word in tokenize($s, '-| ')
               return
                   concat(
                       upper-case(substring($word, 1, 1)),
                       substring($word, 2))
               , ' ')" />
   </xsl:function>
</xsl:stylesheet>
Cheers,
-- Abel Braaksma
  http://www.nuntia.nl