You need to move the logic inside the variable, something like below:
<xsl:variable name="newURL">
<xsl:value-of select="$url"/>
<xsl:if test="child::area">
<xsl:text>?area=</xsl:text>
<xsl:value-of select="area"/>
</xsl:if>
<xsl:if test="child::action">
<xsl:text>?action=</xsl:text>
<xsl:value-of select="action"/>
</xsl:if>
<xsl:if test="child::page">
<xsl:text>?page=</xsl:text>
<xsl:value-of select="page"/>
</xsl:if>
</xsl:variable>
<xsl:value-of select="$newURL"/>
And in this case one would use <xsl:choose> rather than <xsl:if>
Regards,
--A
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