<xsl:template match="para">
      <xsl:copy>
          <xsl:attribute name="mypara">type_first</xsl:attribute>
          <dummy id="first_letter">
              <xsl:value-of select="substring(.,1,1)"/>
          </dummy>
          <xsl:value-of select="substring(text()[1], 2)" />
                   <xsl:copy-of select="node()[position() &gt; 1]" />
      </xsl:copy>
</xsl:template>

This seems to work Mukul, though I need to check thouroghly as I may have 
comment nodes in <para> element. 

Martin: I will get to you for what I actually intend to do.

Thanks guys.

--Pankaj