you have two templates matching
    <xsl:template match="@*|node()">
    <xsl:template match="@*|node()">
which is an errror (even though they are the same template) a system may
ignore the first or it may stop and reject the stylesheet.


            <xsl:copy-of select="/title/indexterm"/>
This copies nothing, you meant
            <xsl:copy-of select="title/indexterm"/>
ie the indexterm grandchild of the current node (topic).
/title would select the title child element of teh root but there is no
such element, the element of  / is topic.

> (I haven't figured gotten as far as wrapping
> the indexterm elements yet):

that's easy
<keywords>
            <xsl:copy-of select="title/indexterm"/>
</keywords>

David