The script you posted is rather odd, it's got elements from the old 1998 
working draft (MSXML 2-2.5) and a namespace for the XSLT spec (MSXML 3 and 
up).

If you're using MSXML or .NET, I'd probably handle the entire thing in a 
date function.  Personally, I'd use javascript, but you can use whatever 
language your processor supports.  You can even do this by creating an 
external class and adding it as an extension object, but the scripting 
approach is a little easier to understand IMO, at least at first.   Here's an 
example of how to do this with javascript extensions:

Using this XML:

<?xml version="1.0" standalone="yes"?>
<?xml-stylesheet type="text/xsl" href="demo.xslt"?>
<root>January 12, 1998</root>


With this XSLT:
<?xml version="1.0" encoding="UTF-8"?>
<xsl:stylesheet version="1.0"
                xmlns:xsl="http://www.w3.org/1999/XSL/Transform"
                xmlns:msxsl="urn:schemas-microsoft-com:xslt"
                xmlns:dates="urn:rdcpro-com:dates"
                >
    <xsl:output method="html" encoding="UTF-8"/>
    <msxsl:script language="JScript" implements-prefix="dates">
        <![CDATA[
            function parseDate(oNodeList) {
            var dateString = oNodeList[0].text;
            var t = Date.parse(dateString);
            return t;
            }
            function formatDate(t) {
            var oDate = new Date(t);
            return oDate.getFullYear() + "-" + (oDate.getMonth() + 1) + "-" 
+ oDate.getDate();
            }
            function dateAdd(t, sPeriod, iAdder) {
                var oDate = new Date(t);
                switch (sPeriod)
                {
                    case "day" :
                        oDate.setDate(oDate.getDate() + iAdder);
                        break;
                    case "month" :
                        oDate.setDate(oDate.getMonth() + iAdder);
                        break;
                    case "year" :
                        oDate.setDate(oDate.getYear() + iAdder);
                        break;
                }   
                return oDate.valueOf();
            }
        ]]>
    </msxsl:script>
    
    <xsl:template match="root">
        <table cellspacing="5px">
            <tr>
                <td>Input Date:</td>
                <td><xsl:value-of select="."/></td>
            </tr>
            <tr>
                <td>Formatted Date:</td>
                <td><xsl:value-of 
select="dates:formatDate(dates:parseDate(.))"/></td>
            </tr>
            <tr>
                <td>Add 2 days</td>
                <td><xsl:value-of 
select="dates:formatDate(dates:dateAdd(dates:parseDate(.), 'day', 2))"/></td>
            </tr>
            <tr>
                <td>Add 20 days</td>
                <td><xsl:value-of 
select="dates:formatDate(dates:dateAdd(dates:parseDate(.), 'day', 20))"/></td>
            </tr>
            <tr>
                <td>Subtract 2 months</td>
                <td><xsl:value-of 
select="dates:formatDate(dates:dateAdd(dates:parseDate(.), 'month', 
-2))"/></td>
            </tr>
            <tr>
                <td>Add 2 years</td>
                <td><xsl:value-of 
select="dates:formatDate(dates:dateAdd(dates:parseDate(.), 'year', 2))"/></td>
            </tr>
        </table>
    </xsl:template>
</xsl:stylesheet>


you get this result:


Input Date:            January 12, 1998 
Formatted Date:    1998-1-12 
Add 2 days            1998-1-14 
Add 20 days          1998-2-1 
Subtract 2 months 1997-12-29 
Add 2 years          1998-4-10 

Regards,
Mike Sharp