XSLT treats text nodes and element nodes in essentially the same way
so it as easy (or hard) to handle mixed content inline elements as pure
element content.

<xsl:template match="para">
<p>
<xsl:apply-templates/>
</p>
</xsl:template>


<xsl:template match="bold">
<b>
<xsl:apply-templates/>
</b>
</xsl:template>


<xsl:template match="image">
<img src="{@src}"/>
</xsl:template>

would convert your example to HTML.

David

<para>
Some text <bold>text</bold> more text <italics>text</italics> more text <image src="icon.png" />. Some more text.
</para>

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