David,
I want to extend a hearty thanks to you for your efforts this morning. 
You have given me enough to build upon and I really appreciate it!  It is
becoming clearer by the minute...

Many thanks,

JOHN

>
>> Does this clarify things?
>
> yes.
>
> change match="/" to match="NewDataset"
>
>
>
> <NewDataset>
>   <BillDetail>
>     <OBLIGATION_ID>2750</OBLIGATION_ID>
>     <PHONE_NUMBER>1234567890</PHONE_NUMBER>
>     <one/>
>   </BillDetail>
>   <BillDetail>
>     <OBLIGATION_ID>2750</OBLIGATION_ID>
>     <PHONE_NUMBER>1234567890</PHONE_NUMBER>
>     <two/>
>   </BillDetail>
>   <BillDetail>
>     <OBLIGATION_ID>2750</OBLIGATION_ID>
>     <PHONE_NUMBER>9876543210</PHONE_NUMBER>
>   </BillDetail>
>   <BillDetail>
>     <OBLIGATION_ID>3940</OBLIGATION_ID>
>     <PHONE_NUMBER>1234567890</PHONE_NUMBER>
>   </BillDetail>
> </NewDataset>
>
>
>
> <xsl:stylesheet xmlns:xsl="http://www.w3.org/1999/XSL/Transform"
> version="1.0">
>
> <xsl:key name="byObligation" match="BillDetail" use="OBLIGATION_ID" />
> <xsl:key name="byObligationAndPhone" match="BillDetail"
> use="concat(OBLIGATION_ID, ':',PHONE_NUMBER)" />
>
> <xsl:strip-space elements="*"/>
> <xsl:output indent="yes"/>
>
> <xsl:template match="NewDataset">
>   <xsl:for-each
> select="BillDetail[generate-id()=generate-id(key('byObligation',OBLIGATION_ID))]">
>     <xsl:variable name="OBLIGATION" select="OBLIGATION_ID"/>
>     <group>
>       <xsl:for-each
> 	  select="../BillDetail[generate-id()=generate-id(key('byObligationAndPhone'
> 		  ,concat($OBLIGATION,':',PHONE_NUMBER)))]">
> 	<group>
> 	  <xsl:copy-of select="key('byObligationAndPhone'
> ,concat($OBLIGATION,':',PHONE_NUMBER))"/>
> 	</group>
>       </xsl:for-each>
>     </group>
>   </xsl:for-each>
> </xsl:template>
>
> </xsl:stylesheet>
>
>
>
>
> saxon nds.xml nds.xsl
> <?xml version="1.0" encoding="utf-8"?>
> <group>
>    <group>
>       <BillDetail>
>          <OBLIGATION_ID>2750</OBLIGATION_ID>
>          <PHONE_NUMBER>1234567890</PHONE_NUMBER>
>          <one/>
>       </BillDetail>
>       <BillDetail>
>          <OBLIGATION_ID>2750</OBLIGATION_ID>
>          <PHONE_NUMBER>1234567890</PHONE_NUMBER>
>          <two/>
>       </BillDetail>
>    </group>
>    <group>
>       <BillDetail>
>          <OBLIGATION_ID>2750</OBLIGATION_ID>
>          <PHONE_NUMBER>9876543210</PHONE_NUMBER>
>       </BillDetail>
>    </group>
> </group>
> <group>
>    <group>
>       <BillDetail>
>          <OBLIGATION_ID>3940</OBLIGATION_ID>
>          <PHONE_NUMBER>1234567890</PHONE_NUMBER>
>       </BillDetail>
>    </group>
> </group>