You can make this easier by doing it in one pass:

<xsl:analyze-string select="." regex="^\s+|\s+$">
....

Greedy matching (which it is always) will ensure that the matching-substring is always either the leading or the trailing. Non-matching-substring is always the middle part.

<xsl:template match="e">
  <xsl:analyze-string select="." regex="^\s+|\s+$">
    <xsl:matching-substring>
      <xsl:value-of select="."/>
    </xsl:matching-substring>
    <xsl:non-matching-substring>
      <e><xsl:value-of select="."/></e>
    </xsl:non-matching-substring>
  </xsl:analyze-string>
</xsl:template>