Did you try this?

> you haven't shown your code, but it probably starts off by taking the
> string value of the parameter StringToTransform. The string value of an
> element is its character data ingnoring any element nodes. So you lose
> your nested html at that point.
> 
> Don't do that, do this:
> 
> <xsl:template match="p//text()">
> 	<xsl:call-template name="transformXMLString">
>         	<xsl:with-param name="StringToTransform" select="."/>
> 	</xsl:call-template>	
> </xsl:template>
> 
> so you apply the transform individually to text node descendants of p
> you can then have templates for other elements that copy to the result
> tree.
> 
> David