IBM's DeveloperWorks recently published an article with some good
suggestions on using xsl:message to display stylesheet activity on the
console. It should be available at
http://www.ibm.com/developerworks/xml/library/x-debugxs.html
Xalan also has some tracing APIs, which tools can use to watch a
stylesheet execute. I know some of the Websphere developers were looking
at using those to develop an "XSLT Editor", but I don't know the current
status of that tool, and there may be competing tools I'm not aware of.
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Joe Kesselman / IBM Research