something like this, perhaps. (It's hard to tell your requiremnts from
this example) Note that it is an error to use an element name of xml
this (any element name beginning with xml) is reserved for use by w3c
for use in future xml specs.

David


<xsl:stylesheet version="2.0"
		xmlns:xsl="http://www.w3.org/1999/XSL/Transform">

<xsl:template match="*">
 <xsl:copy>
  <xsl:copy-of select="@*"/>
  <xsl:apply-templates/>
 </xsl:copy>
</xsl:template>


<xsl:template match="path">
 <xsl:copy>
  <xsl:copy-of select="@*"/>
  <xsl:attribute name="path" select="key('p',.)"/>
  <xsl:apply-templates/>
 </xsl:copy>
</xsl:template>

<xsl:key name="p" match="def/val" use="../name"/>

</xsl:stylesheet>



$ saxon9  p.xml p.xsl
<?xml version="1.0" encoding="UTF-8"?><xml>
 <def>
     <name>Var1</name>
     <val>0</val>
         <def>
         <name>SubVar</name>
         <val>012</val>
     </def>
 </def>
 <def>
     <name>Var2</name>
     <val>1</val>
 </def>
 <test-node>
         <use>
             <var-path>
                 <path path="0">Var1</path>
                 <path path="012">SubVar</path>
             </var-path>
         </use>
 </test-node>
</xml>

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