Question

I cannot wrap <panel> tags to second level individual items as shown in Expected result bellow. Instead I get all 1.x element values into a single node with the xslt i have written bellow. Please help me.

Source xml

    <root>
    <step id="1">
        <content>
            <text>
                1.0 Sample first level step text
            </text>
        </content>
        <content/>
        <step>
            <content>
                <text>
                    1.1 Sample second level step text
                </text>
            </content>
        </step>
        <step>
            <content>
                <text>
                    1.2 Sample second level step text
                </text>
            </content>
        </step>
        <step>
            <content>
                <text>
                    1.3 Sample second level step text
                </text>
            </content>
        </step>
    </step>
    <step id="2">
        <content>
            <text>
                2.0 Sample first level step text
            </text>
        </content>
        <content/>
        <step>
            <content>
                <text>
                    2.1 Sample second level step text
                </text>
            </content>
        </step>
        <step>
            <content>
                <text>
                    2.2 Sample second level step text
                </text>
            </content>
        </step>
        <step>
            <content>
                <text>
                    2.3 Sample second level step text
                </text>
            </content>
        </step>
    </step>
</root>

Expected output

<panel>
    <panel>
        <panel>
            1.0 Sample first level step text
        </panel>
        <panel>
            1.1 Sample second level step text
        </panel>
        <panel>
            1.2 Sample second level step text
        </panel>
        <panel>
            1.3 Sample second level step text
        </panel>
    </panel>
    <panel>
        <panel>
            2.0 Sample first level step text
        </panel>
        <panel>
            2.1 Sample second level step text
        </panel>
        <panel>
            2.2 Sample second level step text
        </panel>
        <panel>
            2.3 Sample second level step text
        </panel>
    </panel>
</panel>

My XSLT

<xsl:template match="/">
    <panel>
        <xsl:apply-templates/>
    </panel>
</xsl:template>

<xsl:template match="root/step" >
    <panel>
        <panel>
            <xsl:apply-templates select ="content/text/node()"></xsl:apply-templates>
        </panel>
        <panel>
            <xsl:apply-templates select ="step/content/text/node()"></xsl:apply-templates>
        </panel>
    </panel>
</xsl:template>

Answer 1

The trick is usage // accessor

<xsl:template match="/">
    <panel>
        <xsl:apply-templates select='//text'/>
    </panel>
</xsl:template>

<xsl:template match="text" >
        <panel>
            <xsl:apply-templates select ="./node()"></xsl:apply-templates>
        </panel>
</xsl:template>

place expected formatting instead of my node()

EDITED
To handle grouping as you ask, add one more

<xsl:template match="/">
    <panel>
        <xsl:apply-templates select='/root/step' mode="root"/>
    </panel>
</xsl:template>
<xsl:template match="step" mode="root"><!-- mode allows distinguish another tag 'step'-->
     <panel> <!-- now we can convert tree to planar -->
         <xsl:apply-templates select='//text'/>
     </panel>    
</xsl:template>

<xsl:template match="text" >
        <panel>
            <!-- format text from node text there -->
            <xsl:apply-templates select ="text()"></xsl:apply-templates>
        </panel>
</xsl:template>