> but it does not leave it "as-is", it escapes the "<" and ">".  

No!!!

Saxon didn't escape them, you did, by placing them in CDATA.
That's what CDATA does, it's the only thing it does.
If you doon't want the < to be escaped don't escape it by placing it in
CDATA. 

If you go, in an XML file

<![CDATA[ aaa < bbb < ccc ]]>

then any XML application sees exactly the same as if you'd have entered

 aaa &lt; bbb &lt; ccc 

or

 aaa &#60; bbb &lt; ccc 

CDATA is just an alternative quoting syntax, useful if you have lots of
< and & that need quoting.

So you passed in a quoted <, ie a < as character data, and a quoted <
comes out. (The system might output it as
&lt; or &#60; or <![CDATA[<]]> but as these are all equivalent it
doesn't matter which. Just as you may have surrounded attribute values
with "" and they come out surrounded with '', so long as the XSLT system
produces something that will parse the same way, it doesn't matter.

David

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