How to unflatten the source XML ?

Hi,

I am new to the XSLT. 

Would you please tell me how to group fixed number (say 3) of consecutive node together?

The original file

<item>A</item>
<item>B</item>
<item>C</item>
<item>D</item>
<item>E</item>
<item>F</item>
<item>G</item>

should become

<group id="1">
    <item>A</item>
    <item>B</item>
    <item>C</item>
</group>
<group id="2">
    <item>D</item>
    <item>E</item>
    <item>F</item>
<group id="3">
    <item>G</item>
</group>

Someone told me that it is about pagination. However, I do not come across any light in this direction. 

Is it possible to be done by XSL? 

Any help (solutions, possible solutions, resources, URL, any kind) on this is highly appreciated.

Herman
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