Try changing the templates for "bold" and "emph" to:
<xsl:template match="bold">
<strong><xsl:apply-templates select="."/></strong>
</xsl:template>
<xsl:template match="emph">
<i><xsl:apply-templates select="."/></i>
</xsl:template>
The select="." looks wrong - it will cause the template to invoke itself.
You just want <xsl:apply-templates/>, so it processes its children.
Michael Kay
http://www.saxonica.com/
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