<xsl:if 
test="position()!=last()">&#32;|&#32;</xsl:if>

that means do  space|space (which you could have written as  | )
If you are the last node in the current node list. By default
apply-templates will select all child nodes including white space text
nodes.

If you want to put a | after the last SubMenuItem then either keep the
template as is but just use select="SubMenuItem" so you only have
SubMenuItem nodes, or instead change the test to
not(following-sibling::SubMenuItem)

David

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