RE: Preserve-space isn't
It could be that with XMLSpy you are running into a known "bug" in the MSXML processor.
(I put "bug" in quotes because the "fix" offered by MS to this issue is to argue from a loophole in the spec that it's not a bug; and sure enough, the spec does offer the loophole.)
There are several fixes available to you, depending on your situation. One of them is to use a different XSLT engine. Another is apparently (I personally haven't had to try this) to declare xml:space="preserve" at an appropriate point in your input document, perhaps (to be safe) at the top. (That may seem like repainting the room to cover a mark on the wall, but there you have it.)
PURCHASE STYLUS STUDIO ONLINE TODAY!
Purchasing Stylus Studio from our online shop is Easy, Secure and Value Priced!
Download The World's Best XML IDE!
Accelerate XML development with our award-winning XML IDE - Download a free trial today!
Subscribe in XML format