If I needed more control in a pure xslt way I'd probably do a 2nd pass
over the result tree either as a 2nd transform or by using a variable
and then a special mode to apply templates, something like

<xsl:template match="*" mode="indent">
<xsl:text>&#10;</xsl:text>
<xsl:for-each select="ancestor::*"><xsl:text>  </xsl:text></xsl:for-each>
<xsl:copy>
<xsl:copy-of select="@*"/>
<xsl:apply-templates mode="indent"/>
<xsl:text>&#10;</xsl:text>
<xsl:for-each select="ancestor::*"><xsl:text>  </xsl:text></xsl:for-each>
<xsl:copy>
</xsl:template>

Then you can ealy add special templates

<xsl:template match="foo" mode="indent">
<xsl:text>&#10;&#10;</xsl:text>
<xsl:comment>double spaced</xsl:comment>
<xsl:for-each select="ancestor::*"><xsl:text>  </xsl:text></xsl:for-each>
<xsl:copy>
<xsl:copy-of select="@*"/>
<xsl:apply-templates mode="indent"/>
<xsl:text>&#10;</xsl:text>
<xsl:for-each select="ancestor::*"><xsl:text>  </xsl:text></xsl:for-each>
<xsl:copy>
</xsl:template>


This way the indenting doesn't intefere with your main transform and can
easily be put in a common stylesheet that you include when needed.

David