spacing issue

Hi everyone, thank you all in advance for the help,

I am getting strange spaces in my output. A sample of my code is below:

XSLT

<?xml version="1.0" encoding="utf-8"?>
<xsl:stylesheet version="2.0"
xmlns:xsl="http://www.w3.org/1999/XSL/Transform">
	<xsl:output method="html" indent="yes" omit-xml-declaration="yes"
encoding="ISO-8859-1" name="html"/>

<xsl:template match="/">
	<p class="sub">(<xsl:apply-templates
select="subsectionnumber"/>)&#xA0; <xsl:apply-templates
select="subsectiontext"/></p>
</xsl:template>

<xsl:template match="subsectionnumber">
	<xsl:apply-templates
select="text()|strong|a|graphic|em|sup|sub|u|insert|br|eacute|hr"/>
</xsl:template>

<xsl:template match="text()">
	<xsl:value-of select="."/>
</xsl:template>

<xsl:template match="insert">
	<p class="insert"><xsl:apply-templates/></p>
</xsl:template>

Sample xml

<subsectionnumber><insert>2</insert></subsectionnumber>
<subsectiontext>Here is some text for subsection 2</subsectiontext>

Output.

Without the insert tags in the above line everything is sweet as some
kind of sweet candy. However with insert in the xml (and any other
inline element) I get spaces around my subsectionnumber.

Example

Without <insert>

<p class="sub">(2)&nbsp; A bylaw passed by the board may be repealed,</p>

With <insert>

<p class="para">(

        <insert><span class="insert">t.1</span></insert>

          				)
     			&nbsp;

            <insert><span class="insert">granting authorization to
members</span></insert>

         </p>


What I need?

Ok, so the code is ugly, I for one am not a stickler for beautifully
formatted code, however  I have to get rid of the extra space put in
by the browser for the carriage returns. ie ( t.1 ).

Any help would be great.

Spencer