> Am I correct in my understanding that the reason the stylesheet
> below works, separating each item from the <xsl:sequence/> with
> a single whitespace character, is due to
> 
>  http://www.w3.org/TR/xslt-xquery-serialization/#serdm

No. the white space is really added to the tree, not just on
serialisation (if you save the result into a variable and query into it
you will see the spaces are already added even if no serialisation
occurs).

see step 5 in

http://www.w3.org/TR/xslt20/#constructing-simple-content

David