Your question appears to be about using multiple input documents.
This is fully supported in XSLT 1 (including msxml) using the document()
function.
It is on the area of generating multiple output documents where XSLT 1
is lacking, and many xslt engines have extension elements (saxon:output,
xalan:redirect, etc). msxml only has limited ability to produce multiple
output (via escaping to a dom scripting language and then writing out
teh xml from the dom node, eg its .xml method)
David
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