> But I think:  <xsl:template match="searchhit"> won't work because of 
> <searchhit> and </searchhit> being CDATA within the fulltext element.

Right, so you have something like:

 ---8<---8<---
<fulltext><![CDATA[This module is the <searchhit>third</searchhit> in the
OPPS series. More text...]]></fulltext>
 ---8<---8<---

> I think I need some sort of replacement template to replace the
> <searchhit> tags.

Would this kind of template do the trick?

 ---8<---8<---
  <xsl:template name="wrapper">
    <xsl:param name="content"/>
    <xsl:choose>
      <xsl:when test="contains($content, '&lt;searchhit&gt;')">
        <xsl:value-of select="substring-before($content, 
'&lt;searchhit&gt;')"/>
        <span style="background: red; padding: 0.125em 0.5em;">
          <xsl:value-of 
select="substring-before(substring-after($content, 
'&lt;searchhit&gt;'), '&lt;/searchhit&gt;')"/>
        </span>
        <xsl:call-template name="wrapper">
          <xsl:with-param name="content"><xsl:value-of 
select="substring-after($content, 
'&lt;/searchhit&gt;')"/></xsl:with-param>
        </xsl:call-template>
      </xsl:when>
      <xsl:otherwise>
        <xsl:value-of select="$content"/>
      </xsl:otherwise>
    </xsl:choose>
  </xsl:template>

  <xsl:template match="/result/document/fulltext">
    <xsl:call-template name="wrapper">
      <xsl:with-param name="content"><xsl:value-of 
select="text()"/></xsl:with-param>
    </xsl:call-template>
  </xsl:template>
 ---8<---8<---

-- 
Ixa