<object>
         <name>apple</name>
         <size>2</size>
         <id>1</id>
       </object>
       <object>
         <name>orange</name>
    ....

i would like to literaly create a tree out of this data.

You mean you want to take that document and grow an orchard?
I fear that is a transformation too far, even for XSLT...

i have a named template which takes the current object node and
the display node as a argument..

...
<display>
  <property field="name" />
  <text> -- </text>
  <property field="size" />
</display>

it would be perfectly fine if there would be only property nodes in the
display...

apple - 2
   orange - 5