I’ve been playing with XSLT in the Browser. It appears simple enough: Just add an xml-stylesheet processing instruction to the top of your XML, pointing at your XSLT.
<?xml-stylesheet href="stylish.xsl" type="text/xsl"?>
But there’s one more condition that needs to be met: Inside the stylesheet itself, you have to say
<xsl:output type="html"/>. Not xml. Not leaving out the xsl:output tag. It has to be present and set to html or you don’t get any useful output.