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Section 4.2 rule 4 contains a list of XSLT elements from which whitespace text nodes should be stripped (in case xsl:space is used). This list needs to be updated, at least to include xsl:package and xsl:override. Basically it should include all elements with element-only content models.
Added to the list: xsl:fork xsl:mode xsl:override xsl:package xsl:use-package