Saxonica

Saxonica is the new home of the Saxon XSLT and XQuery processor developed by Michael Kay. Saxonica undertakes the development of the Saxon XSLT, XQuery, and XML Schema processor.

It will take a long while before we see XSLT 2.0 from Microsoft. Therefore, for anyone who wants to play with XSLT 2.0 and XQuery, download SAXON from Sourceforge. I heard it works nicely with .NET.