Vikram,
As you are using <XML id = "testxml"></XML> you are surely only working
with IE4+
You aren't specifying the xml or xsl on the data island.
You are better off doing 
var testXSL = new ActiveXObject("Microsoft.XMLDOM");
var testXML = new ActiveXObject("Microsoft.XMLDOM");
var html = new ActiveXObject("Microsoft.XMLDOM");
testXSL.async = false;
testXML.async = false;
testXSL.load("test.xsl");
testXML.load("test.xml");
html.loadXML(testXML.transformNode(testXSL));

Now you can do say
var anodes = html.selectNodes("//a");
for (var i=0; i < anodes.length; i++){
	alert(anodes(i).value);
}
Or something like that

Ciao Chris

XML/XSL Portal
http://www.bayes.co.uk/xml


 XSL-List info and archive:  http://www.mulberrytech.com/xsl/xsl-list