Text replacement using "recursion"

I have a reporting system that merges three xml sources:

 1) boilerplate - text seen in all reports
 2) custom - text that is used to replace "phrase" elements in boilerplate
 3) vars - values (text or numbers) used to select from custom text

This works fine unless I wish to put a "phrase" element inside another
"phrase" element.  I originally did the "flat" version" with an
implication that in future I would allow "recursion" (phrases inside
phrases).

Well I bit off a little more than I bargained for because I do not
seem to understand how to get this type of "recursion" to work.

Note, that there are several ways this is used.  This can be seen in
the examples.  I can expound on this if need be - I am trying to keep
this very simple to start with.

Following my message are example files:

  1)  boilerplate.xml - For simplicity I have combined boilerplat.xml,
      custom.xml and vars.xml into this one file - normally they are
      passed as pararmeters (it get same results).
  2a) merge.xsl (original version) - merges the three sources
  2b) merge.xsl (attempt at "recursion") - merges the three sources
  3)  present.xsl - present report.xml as HTML file report.htm to
      view results as user would see them.

I have been using command line tols to test this problem.

To create the report.xml file I process these files I am using
msxsl.exe under Windows:

  msxsl boilerplate.xml merge.xsl > report.xml

or xsltproc under linux:

  xsltproc merge.xsl boilerplate.xml >report.xml

To present the report.xml as an HTML file report.htm, I use one of
these commands. For Windows:

  msxsl report.xml present.xsl > report.htm

for linux:

  xsltproc present.xsl report.xml >report.htm


So, can anyone help me understand how to process a "phrase" inside a "phrase"?

Also, any critiques or suggestion about my code are most welcome as I
am bit of a newbie.

Thanks for any help!

Dan Vokt, Teleservices

==== FILES ARE BELOW ======================================

1) boilerplate, custom, vars:
---- boilerplate.xml -----------------------------------------------------
<?xml version="1.0" encoding="ISO-8859-1"?>
<report>
<vars> <!-- vars.xml generated at runtime -->
 <var name="var1">value1</var>
 <var name="var2">value2</var>
 <var name="var3">value3</var>
 <var name="var4">value4</var>
</vars>

<lists> <!-- custom.xml -->
 <list name="keyword-list">
  <option id="value1">VALUE_1</option>
  <option id="value2">VALUE_2</option>
  <option id="value3">VALUE_3</option>
  <option id="value4">VALUE_4</option>
 </list>
 <list name="phrase-list">
  <option id="value1">this is phrase list item 1 from phrase-list</option>
  <option id="value2">this is phrase list item 2 from phrase-list</option>
  <option id="value3">this is phrase list item 3 from phrase-list</option>
  <option id="value4">this is phrase list item 4 from phrase-list</option>
 </list>
 <list name="phrase-list-recursive">
  <option id="value1">this is phrase list item 1 from
phrase-list-recursive, with a value of '<phrase name="var1"/>' for
var1</option>
  <option id="value2">this is phrase list item 2 from
phrase-list-recursive, with a value of '<phrase name="var1"/>' for
var1</option>
  <option id="value3">this is phrase list item 3 from
phrase-list-recursive, with a value of '<phrase name="var1"/>' for
var1</option>
  <option id="value4">this is phrase list item 4 from
phrase-list-recursive, with a value of '<phrase name="var1"/>' for
var1</option>
 </list>
</lists>

<h4>name to value:</h4> <!-- boilerplate.xml -->
Your var1 value of <phrase name="var1"/> is very interesting, though
not as interesting as the <phrase name="var4"/> value of your var4.<br
/>
<h4>name to keyword:</h4>
Your var1 keyword of <phrase name="var1" list="keyword-list"/> is very
interesting, though not as interesting as the <phrase name="var4"
list="keyword-list"/> keyword of your var4.<br />
<h4>name to phrase:</h4>
Your var1 phrase of <phrase name="var1" list="phrase-list"/> is very
interesting, though not as interesting as the <phrase name="var4"
list="phrase-list"/> phrase of your var4.<br />
<h4>name to phrase-recursive -- PROBLEM!!!:</h4>
Your var1 recursive phrase of <phrase name="var1"
list="phrase-list-recursive"/> is very interesting, though not as
interesting as the <phrase name="var4" list="phrase-list-recursive"/>
recursive phrase of your var4.<br />
</report>
--------------------------------------------------------------------------

2a) Here is the ORIGINAL XSL file that merges these:
---- merge.xsl (original) ------------------------------------------------
<?xml version="1.0"?>
<xsl:stylesheet xmlns:xsl="http://www.w3.org/1999/XSL/Transform" version="1.0">

<xsl:output method="xml" encoding="utf-8" indent="yes"/>
<xsl:strip-space elements="report"/>

<!-- original -->
<xsl:template match="phrase">
<span class="phrase">
 <xsl:variable name="phrase" select="@name"/>
 <xsl:variable name="list">
  <xsl:choose>
    <xsl:when test="@list"><xsl:value-of select="@list"/></xsl:when>
    <xsl:otherwise><xsl:value-of select="@name"/></xsl:otherwise>
  </xsl:choose>
 </xsl:variable>
 <xsl:variable name="var" select="//vars/var[@name=$phrase]/text()"/>
 <xsl:variable name="verbiage"
select="//lists/list[@name=$list]/option[@id=$var]"/>
 <xsl:if test="string-length($verbiage)>0"><xsl:value-of
select="$verbiage"/></xsl:if>
 <xsl:if test="string-length($verbiage)=0"><xsl:value-of
select="$var"/></xsl:if>
</span>
</xsl:template>


<xsl:template match="*">
 <xsl:copy>
  <xsl:copy-of select="@*"/>
  <xsl:apply-templates/>
 </xsl:copy>
</xsl:template>

<!-- do not directly process vars or lists -->
<xsl:template match="vars"/>
<xsl:template match="lists"/>
</xsl:stylesheet>
--------------------------------------------------------------------------

2b) Here is my lame ATTEMPT at "recursion":
---- merge.xsl ("recursive") ---------------------------------------------
<?xml version="1.0"?>
<xsl:stylesheet xmlns:xsl="http://www.w3.org/1999/XSL/Transform" version="1.0">

<xsl:output method="xml" encoding="utf-8" indent="yes"/>
<xsl:strip-space elements="report"/>

<xsl:template match="phrase">
 <xsl:variable name="phrase-name" select="@name"/>
 <xsl:variable name="list">
  <xsl:choose>
    <xsl:when test="@list"><xsl:value-of select="@list"/></xsl:when>
    <xsl:otherwise><xsl:value-of select="@name"/></xsl:otherwise>
  </xsl:choose>
 </xsl:variable>
 <xsl:variable name="var" select="//vars/var[@name=$phrase-name]/text()"/>
 <xsl:variable name="verbiage"
select="//lists/list[@name=$list]/option[@id=$var]"/>
 <xsl:variable name="phrase">
  <xsl:choose>
    <xsl:when test="string-length($verbiage)>0"><xsl:value-of
select="$verbiage"/></xsl:when>
    <xsl:otherwise><xsl:value-of select="$var"/></xsl:otherwise>
  </xsl:choose>
 </xsl:variable>
<span class="phrase">
 <xsl:value-of select="$phrase"/>
 <xsl:if test="//vars/var[@name=$phrase-name]/phrase">
  <xsl:apply-templates select="//vars/var[@name=$phrase-name]/phrase"/>
 </xsl:if>
 <xsl:if test="//lists/list[@name=$list]/option[@id=$var]/phrase">
  <xsl:apply-templates
select="//lists/list[@name=$list]/option[@id=$var]/phrase"/>
 </xsl:if>
</span>
</xsl:template>

<xsl:template match="*">
 <xsl:copy>
  <xsl:copy-of select="@*"/>
  <xsl:apply-templates/>
 </xsl:copy>
</xsl:template>

<!-- do not directly process vars or lists -->
<xsl:template match="vars"/>
<xsl:template match="lists"/>
</xsl:stylesheet>
--------------------------------------------------------------------------

3) I present the report.xml as an HTML file report.htm using this:
---- present.xsl ---------------------------------------------------------
<?xml version="1.0"?>
<xsl:stylesheet xmlns:xsl="http://www.w3.org/1999/XSL/Transform" version="1.0">

<xsl:output method="xml" indent="yes" encoding="utf-8"/>

<xsl:template match="/">
 <html>
 <head>
  <title>Simple Recursive Phrase</title>
  <style>
  p {
     margin-top: 0;
  }
  h4 {
     margin-bottom: .5em;
  }
  .phrase {
     color:blue;
   }
  .phrase .phrase {
     color:red;
   }
  .phrase .phrase .phrase {
     color:green;
   }
  .phrase .phrase .phrase .phrase {
     color:magenta;
   }
  </style>
 </head>
 <body><xsl:apply-templates/></body>
 </html>
</xsl:template>

<xsl:template match="para">
 <xsl:if test="@title!=''">
  <h4 class="paratitle"><xsl:value-of select="@title"/></h4>
 </xsl:if>
 <p><xsl:apply-templates/></p>
</xsl:template>

<xsl:template match="a|ul|li|img|table|tr|td|span|div|pre|label|h4">
 <xsl:copy><xsl:copy-of select="@*"/>
 <xsl:apply-templates/>
 </xsl:copy>
</xsl:template>

<xsl:template match="br"><br /></xsl:template>

</xsl:stylesheet>
--------------------------------------------------------------------------