Use node-set extension

The node-set() extension function is an XSLT 1.0 workaround for converting result tree fragments into node-sets. It is unnecessary in XSLT 2.0 and later, where temporary trees can be queried directly.

Two namespaces declare it for that one purpose — EXSLT's common module, http://exslt.org/common, and Microsoft's urn:schemas-microsoft-com:xslt — and the prefix a stylesheet binds to either is the author's to choose, so exsl:node-set, msxsl:node-set and common:node-set can all be the same call. A node-set of your own, in a namespace of your own, is a different function and does whatever you wrote it to do.

Unwrapping by hand is not always a matter of deleting the call and its brackets. The argument sat inside them, so one binding looser than a step still needs them wherever an expression stands around the call: exsl:node-set($x | $y)/title is ($x | $y)/title, where dropping both brackets writes $x | $y/title — a union of $x with the titles under $y, which is another sequence altogether.

Incorrect:

<xsl:stylesheet version="2.0"
  xmlns:xsl="http://www.w3.org/1999/XSL/Transform"
  xmlns:exsl="http://exslt.org/common">
  <xsl:output method="html"/>
  <xsl:template match="/">
    <xsl:variable name="nodes"><item>A</item></xsl:variable>
    <xsl:for-each select="exsl:node-set($nodes)/item">
      <p><xsl:value-of select="."/></p>
    </xsl:for-each>
  </xsl:template>
</xsl:stylesheet>

Correct:

<xsl:stylesheet version="2.0"
  xmlns:xsl="http://www.w3.org/1999/XSL/Transform">
  <xsl:output method="html"/>
  <xsl:template match="/">
    <xsl:variable name="nodes"><item>A</item></xsl:variable>
    <xsl:for-each select="$nodes/item">
      <p><xsl:value-of select="."/></p>
    </xsl:for-each>
  </xsl:template>
</xsl:stylesheet>