first char of first word of first paragraph

1. What I want to do is to select every first paragraph of all chapters
2. Select the first word with  grep., and then select the rest of the
text

Question>
1. How can I select the first 3 words
2. How can I convert the selected string to uppercase?

Thank you
Zsolt Sandor Szabs
Graphic Designer

The source xml file.
<xml>
<chapter id="c1">
	<title>chapter 1</title>
	<setion>
		<para>Smallcaps word para 1 text etc.</para>
		<para>para 2 text etc.</para>
	</setion>
</chapter>
<chapter id="c2">
	<title>chapter 2</title>
	<setion>
		<para>Smallcaps word para 1 text etc.</para>
		<para>para 2 text etc.</para>
	</setion>
</chapter>
</xml>

the desired output
<chapter id="c1">
    <setion>
        <para>
            <FirstChar>S</FirstChar><Smallcaps>MALLCAPS WORD PARA 1
</Smallcaps><RestOfPara>text etc.</RestOfPara>
        </para>
    </setion>
</chapter>

The following xsltfile works, at least with libxslt.
<!--Select the first paragraph of all chapters-->
<xsl:template match="//chapter/section[1]/para[1]" priority="1">

	<xsl:call-template name="FirstWord">
		<xsl:with-param name="string" select="."/>
	</xsl:call-template>

<!--Select all paragraphs-->
<xsl:template match="//para">
	<xsl:call-template name="para.template">
	</xsl:call-template>
</xsl:template>

<xsl:template name="FirstWord">
	<xsl:param name="string"/>
		<xsl:choose>
			<!--does the string contains a space???-->
			<xsl:when test="contains($string,' ')">
				<div>
					<b>
						<!--select characters before the space-->
						<xsl:value-of select="substring-before($string,' ')"/>
					</b>
					<!--give back the space which was stripped down from the first
word-->
					<xsl:text> </xsl:text>
					<!--select characters after the space-->
					<xsl:value-of select="substring-after($string,' ')"/>
				</div>
			</xsl:when>
			<xsl:otherwise>
				<!--call paragraph template-->
				<xsl:call-template name="para.template">
				</xsl:call-template>
			</xsl:otherwise>
  </xsl:choose>
</xsl:template>