something like this, assuming 3 iterations.


<xsl:stylesheet version="1.0" xmlns:xsl="http://www.w3.org/1999/XSL/Transform">
  
<xsl:output indent="yes"/>

<xsl:template match="element/*">
  <xsl:variable name="n" select="name()"/>
    <xsl:for-each select="(//node())[position()&lt;4]">
      <xsl:element name="{$n}">
	<value>
	  <xsl:text>replaced</xsl:text>
	  <xsl:value-of select="position()"/>
	</value>
      </xsl:element>
    </xsl:for-each>
</xsl:template>

<xsl:template match="element">
  <xsl:copy>
    <xsl:apply-templates select="*"/>
  </xsl:copy>
</xsl:template>

</xsl:stylesheet>



$ saxon repl.xml repl.xsl
<?xml version="1.0" encoding="utf-8"?>
<element>
   <innerElement>
      <value>replaced1</value>
   </innerElement>
   <innerElement>
      <value>replaced2</value>
   </innerElement>
   <innerElement>
      <value>replaced3</value>
   </innerElement>
</element>