Ok, Thanks Ken,
I've got both of these solutions working as given, with the results as stated.

However ....

They don't quite implement the spec as given.

> The pattern must be found in its entirety (ie LAR 51 doesn't find "group-2" as "2 Alarm" is not present).

Both the solutions provided are indicating group-2 is present for LAR 51 but this is not so as "2 Alarm" is not actually present there.

<group id="group-2">
<alarm equipment="1 Alarm"/>
<alarm equipment="2 Alarm"/>
<alarm equipment="3 Alarm"/>
</group>

<area name="LAR 51">
<alarm equipment="1 Alarm"/>
<alarm equipment="3 Alarm"/>
<alarm equipment="Frame 1 PSU 1"/>
<alarm equipment="Frame 1 PSU 2"/>
<alarm equipment="Fan Tray 1"/>
</area>

The pattern given must match in its entirety for a match to be declared.
(There may be a further subsidiary issue if I find I need to be able to match "subset" groups, ie where one defined match group is a subset of another but the smaller group may only be matched if the larger one doesn't - ignore this for now; I'll need to work out whether it's necessary once I've got something nearer to the full data.)

> I can help if you don't mind using the following notation using grouping parentheses:
That's no problem - I can adapt the group spec format as I'll be writing that based on a brief visual analysis of the main data.

As I haven't yet had the final data to work on and haven't yet determined exactly how I want the results organized I am interested at the moment in working out the principles of the task and I'll sort out the details later.

<xsl:variable name="groupedAlarms"
              select="doc('groups.xml')/groups/group/alarm"/>

<xsl:template match="alarm">
  <xsl:copy>
    <xsl:apply-templates select="@*"/>
    <xsl:variable name="thisAlarm" select="."/>
    <xsl:for-each select="$groupedAlarms
                          [matches($thisAlarm/@equipment,
                                   concat('^',@equipment,'$'))]">
      <xsl:attribute name="found" select="../@id"/>
      <xsl:variable name="thisGroupedAlarm" select="."/>
      <xsl:analyze-string select="$thisAlarm/@equipment"
                          regex="^{$thisGroupedAlarm/@equipment}$">
        <xsl:matching-substring>
          <xsl:for-each select="regex-group(1)[normalize-space(.)]">
            <xsl:attribute name="found-group">
              <xsl:number select="$thisGroupedAlarm"/>
            </xsl:attribute>
            <xsl:attribute name="found-key" select="."/>
          </xsl:for-each>
        </xsl:matching-substring>
      </xsl:analyze-string>
    </xsl:for-each>
  </xsl:copy>
</xsl:template>

<xsl:template match="@*|node()"><!--identity for all other nodes-->
  <xsl:copy>
    <xsl:apply-templates select="@*|node()"/>
  </xsl:copy>
</xsl:template>

</xsl:stylesheet>~/t/ftemp $
~/t/ftemp $

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