There is an XSLT extension for PHP:
http://devzone.zend.com/node/view/id/1302
I think it's just a frontend to an existing XSLT processor.
I don't think PHP itself is designed with XML processing in mind; but you could write PHP script to parse XML/transfer XML segments between files/etc; probably even to transform XML.
But, I'm still not entirely clear on what you want to do..
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