I have been using fop 0.20.2 to produce pdf documents from xml using
xsl.

When I run under fop-0.94 ...

FOP 0.20.2 implements an old draft of the XSLFO 1.0 standard. FOP
0.94 implements a subset of the standard. Some important details
have changed, you'll have to rework your XSLT. Furthermore, FOP
0.94 validates the FO much more strictly by default.

The problem seems to be with locally declared variables within an
xsl:for-each loop.
I declare a variable globally, then set the value locally just before
the</xsl:for-each>

This should never have worked, because you can't reassign a variable
in XSLT.

When the processing moves back to the start on the xsl:for-each, the
variable has the value of the global variable.

This is the expected outcome. Again, you probably have to rewrite your
XSLT rather thoroughly.