Managed to sort the classpath/loading issue and have got a stage
further.

The external class now loads OK but I think my xslt is wrong somewhere?

Any guidance would much appreciated!

XML:

<dataelements>
    <dataelement>
        <data>New York</data>
    </dataelement>
    <dataelement>
        <data>Boston</data>
     </dataelement>
     <dataelement>
        <data>Denver</data>
     </dataelement>
</dataelements>

XSLT:

<?xml version="1.0" ?>
<xsl:stylesheet version="2.0"
      xmlns:xsl="http://www.w3.org/1999/XSL/Transform"
      xmlns:PGP="iPGP.iPGP"
      exclude-result-prefixes="PGP">

<xsl:template match="dataelements">
   <xsl:value-of select="PGP:setArmor(true()),
    PGP:setConventional(true()),
    PGP:setInputIsText(true()),
    PGP:setOutputIsText(true())"/>

   <xsl:param name="passphrase">mypswd</xsl:param>
   <xsl:param name="asciiresult"></xsl:param>
   <xsl:param name="errormessage"></xsl:param>

   <xsl:variable name="datain" select="data"/>
   <xsl:variable name="encryptData" select="PGP:encrypt($passphrase,
$datain, $asciiresult, $errormessage)"/>
   <xsl:value-of select="$encryptData"/>
</xsl:template>
</xsl:stylesheet>

Output:

C:\Documents and Settings\cbourne\My Documents\PGPJava\saxon8>java -cp
.;C:\java
pgp\iPGP.jar net.sf.saxon.Transform -TJ ..\pgp.xml ..\pgp.xslt
Loading iPGP.iPGP
Looking for method setArmor in Java class class iPGP.iPGP
Number of actual arguments = 1
Trying method getArmor: name does not match
Trying method setArmor: name matches
Method is not static
Method has 1 argument; expecting 0
Trying method getConventional: name does not match
Trying method setConventional: name does not match
Trying method getInputIsText: name does not match
Trying method setInputIsText: name does not match
Trying method getOutputIsText: name does not match
Trying method setOutputIsText: name does not match
Trying method getUseKeyID: name does not match
Trying method setUseKeyID: name does not match
Trying method getOutputFilename: name does not match
Trying method setOutputFilename: name does not match
Trying method getASCIIOutput: name does not match
Trying method getPGPSDKErrorMessage: name does not match
Trying method encrypt: name does not match
Trying method encryptAndSign: name does not match
Trying method decryptAndVerify: name does not match
Trying method hashCode: name does not match
Trying method getClass: name does not match
Trying method wait: name does not match
Trying method wait: name does not match
Trying method wait: name does not match
Trying method equals: name does not match
Trying method toString: name does not match
Trying method notify: name does not match
Trying method notifyAll: name does not match
No method or field matching setArmor with 1 parameter found in class
iPGP.iPGP
Error at xsl:value-of on line 11 of
file:/C:/Documents%20and%20Settings/cbourne/
My%20Documents/PGPJava/saxon8/../pgp.xslt:
  XPST0003: XPath syntax error at char 20 on line 11 in {...ue()),
PGP:setConven
tional}:
    Cannot find a matching 1-argument function named
{iPGP.iPGP}setArmor()
Loading iPGP.iPGP
Looking for method encrypt in Java class class iPGP.iPGP
Number of actual arguments = 4
Trying method getArmor: name does not match
Trying method setArmor: name does not match
Trying method getConventional: name does not match
Trying method setConventional: name does not match
Trying method getInputIsText: name does not match
Trying method setInputIsText: name does not match
Trying method getOutputIsText: name does not match
Trying method setOutputIsText: name does not match
Trying method getUseKeyID: name does not match
Trying method setUseKeyID: name does not match
Trying method getOutputFilename: name does not match
Trying method setOutputFilename: name does not match
Trying method getASCIIOutput: name does not match
Trying method getPGPSDKErrorMessage: name does not match
Trying method encrypt: name matches
Method is not static
Method has 4 arguments; expecting 3
Trying method encryptAndSign: name does not match
Trying method decryptAndVerify: name does not match
Trying method hashCode: name does not match
Trying method getClass: name does not match
Trying method wait: name does not match
Trying method wait: name does not match
Trying method wait: name does not match
Trying method equals: name does not match
Trying method toString: name does not match
Trying method notify: name does not match
Trying method notifyAll: name does not match
No method or field matching encrypt with 4 parameters found in class
iPGP.iPGP
Error at xsl:variable on line 18 of
file:/C:/Documents%20and%20Settings/cbourne/
My%20Documents/PGPJava/saxon8/../pgp.xslt:
  XPST0003: XPath syntax error at char 62 on line 18 in {...,
$asciiresult, $err
ormessa...}:
    Cannot find a matching 4-argument function named
{iPGP.iPGP}encrypt()
Error at xsl:param on line 13 of
file:/C:/Documents%20and%20Settings/cbourne/My%
20Documents/PGPJava/saxon8/../pgp.xslt:
  XTSE0010: xsl:param must be the first element within a template or
function
Error at xsl:param on line 14 of
file:/C:/Documents%20and%20Settings/cbourne/My%
20Documents/PGPJava/saxon8/../pgp.xslt:
  XTSE0010: xsl:param must be the first element within a template or
function
Error at xsl:param on line 15 of
file:/C:/Documents%20and%20Settings/cbourne/My%
20Documents/PGPJava/saxon8/../pgp.xslt:
  XTSE0010: xsl:param must be the first element within a template or
function
Failed to compile stylesheet. 5 errors detected.