The solution:
(the normalize-space() function is only here because my processor is defective)
===================================================
<xsl:stylesheet version="1.0" xmlns:xsl="http://www.w3.org/1999/XSL/Transform">
  <xsl:output method="html" indent="yes" encoding="UTF-8" />
  <xsl:strip-space elements="*" />

  <xsl:template match="/">
    <div id="menu-tree">
      <xsl:apply-templates mode="main-menu" />
    </div>
    <xsl:apply-templates mode="sub-menu" />
  </xsl:template>

  <xsl:template match="menu" mode="main-menu">
    <div id="menu">
      <xsl:apply-templates mode="main-menu" />
    </div>
  </xsl:template>

  <xsl:template match="item" mode="main-menu">
    <xsl:variable name="id"><xsl:number level="multiple" format=".01." /></xsl:variable>
    <xsl:choose>
      <xsl:when test="@title"><div id="m{substring(normalize-space($id), 1, string-length(normalize-space($id)) -1)}"><xsl:value-of select="@title" /></div></xsl:when>
      <xsl:otherwise><div id="m{substring(normalize-space($id), 1, string-length(normalize-space($id)) -1)}"><xsl:value-of select="." /></div></xsl:otherwise>
    </xsl:choose>
  </xsl:template>

  <xsl:template match="item[item]" mode="sub-menu">
    <xsl:variable name="id"><xsl:number level="multiple" format=".01." /></xsl:variable>
    <div id="s{substring(normalize-space($id), 1, string-length(normalize-space($id)) -1)}">
      <xsl:apply-templates mode="menu-item"/>
    </div>
    <xsl:apply-templates mode="sub-menu"/>
  </xsl:template>

  <xsl:template match="item" mode="menu-item">
    <xsl:variable name="id"><xsl:number level="multiple" format=".01." /></xsl:variable>
    <xsl:choose>
      <xsl:when test="@title"><div id="m{substring(normalize-space($id), 1, string-length(normalize-space($id)) -1)}"><xsl:value-of select="@title" /></div></xsl:when>
      <xsl:otherwise><div id="m{substring(normalize-space($id), 1, string-length(normalize-space($id)) -1)}"><xsl:value-of select="." /></div></xsl:otherwise>
    </xsl:choose>
  </xsl:template>

  <xsl:template match="item[not(item)]" mode="sub-menu" />
</xsl:stylesheet>
-- 
Charles Knell
cknell@xxxxxxxxxx - email

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