sort, output multiple 'pages' to one page of pdf

I have a list of letters in xml that need to be output 3 to a page in a pdf.
My stylesheet snippet is xslt 1.0 (that works) and performs this is:
<xsl:for-each select="Letter[position() mod 3 = 1]">
    <!-- New Page -->
<fo:page-sequence master-reference="mainPSM">
     <fo:flow
flow-name="xsl-region-body" font-size="12pt" font-family="monospace">
<fo:block-container padding-top="2.8cm" height="9.3cm"/>
<xsl:call-template name="formatLetter"/>
      <fo:block-container
padding-top=".5cm"/>
      <xsl:for-each select="following-sibling::Letter[
position() &lt; 3 ]">
       <fo:block-container padding-top="3.1cm"
height="9.3cm"/>
       <xsl:call-template name="formatLetter"/>
<fo:block-container padding-top=".5cm"/>
      </xsl:for-each>
     </fo:flow>
</fo:page-sequence>
   </xsl:for-each>

New requirements now request that the
letters be sorted by zip code. If I place an <xsl:sort .../> tag after each
for-each tag, it doesn't sort properly. It appears to sort the elements where
'mod 3 = 1' is true but then the subsequent letters on the page are not sorted
properly. When I tried using a key on the AccountNumber, I quickly found that
each key has a position of 1, so each letter got its own page. When I tried
copying the sorted list to a variable, the 'following-sibling::Letter[
position() &lt; 3 ]' code give me this error:

A node test that matches either
NCName:* or QName was expected.

I am certain that I am overlooking something
here but input would be greatly appreciated. Below is a snapshot of the xml I
am working with:

<Letters>
<Letter>
<Account>
  <AccountNumber
checkdigit="3">296</AccountNumber>
  <NoticeType>Final</NoticeType>
<Customer>
    <FirstName />
    <MiddleName />
    <SecondName />
<SecondFirstName />
    <LastName>LastName1</LastName>
    <NameSuffix />
<WorkPhone />
  </Customer>
  <MailZip>43218-2308</MailZip>
<Balance>737.43</Balance>
  <LateCharge>21.48</LateCharge>
</Account>
</Letter>
<Letter>
<Account>
  <AccountNumber
checkdigit="9">305</AccountNumber>
  <NoticeType>Final</NoticeType>
<Customer>
    <FirstName />
    <MiddleName />
    <SecondName />
<SecondFirstName />
    <LastName>LastName3</LastName>
    <NameSuffix />
<WorkPhone />
  </Customer>
  <MailZip>38363-0550</MailZip>
<Balance>124.34</Balance>
  <LateCharge>5.00</LateCharge>
</Account>
</Letter>
<Letter>
<Account>
  <AccountNumber checkdigit="5">299</AccountNumber>
<NoticeType>Final</NoticeType>
  <Customer>
    <FirstName />
    <MiddleName
/>
    <SecondName />
    <SecondFirstName />
<LastName>LastName2</LastName>
    <NameSuffix />
    <WorkPhone />
</Customer>
  <MailZip>40233-6230</MailZip>
  <Balance>55.00</Balance>
<LateCharge>.30</LateCharge>
</Account>
</Letter>
</Letters>
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