returns 1|1| etc, but:

<xsl:value-of select="(for $i in 1 to 100 return my:test())"
separator="|" />

   <xsl:function name="my:test" >
       <xsl:text>1</xsl:text>
   </xsl:function>

returns 11111

I suspect it has to do with the result being a node() of type text.
However, still the normal casting rules should apply to each item, not?

The function result is returned using an <xsl:sequence> instruction.
So if you use,

<xsl:function name="my:test">
 <xsl:sequence select="'1'" />
</xsl:function>

--
Regards,
Mukul Gandhi