Thank for replying so quickly,
I assumed that I need to solve the problem with a recursive algorythm,
my problem is I got no idea for a good stop critea, as I see no way to
save or get the number of chars I processed jet .
I tried (as mentioned in the first post) to increment a variable
(char_cntr) and compare it with the string-length(), if equals break,
but doesn`t work as I can`t increment variables.

My next idea was to get the number of "char" - children ( which is the
number of yet processed chars) , but children_num remains 0:

  <xsl:template name="string_to_char">
    <xsl:variable name="string_length" select="string-length(@value)"/>
    <xsl:variable name="children_num" select="count(char)"/>
    <xsl:if test="$string_length != $children_num">
      <xsl:element name="char">
        <xsl:attribute name="value">
          <xsl:value-of select="substring(@value, children_num ,1)"/>
        </xsl:attribute>
      </xsl:element>
      <xsl:call-template name="string_to_char"/>
    </xsl:if>
  </xsl:template>

>Apart from this, FXSL has a convenient str-foldl() function/template. It
>implements any char by char string processing.

Thanks, I `ll have a look at that.