I would like some code to justify text _and_ respect empty lines
in the source node.

PS. I figured this would be an xslt question as we need to identify
the empty line and can apply a line break with <fo:block/> whenever
an empty line is encountered.

That's the most  promising approach. Poke around in the
list archive and the XSL FAQ for "tokenization". Generally
this is done using recursive templates. Some (most) processors
have extension functions (look up EXSLT) which simplify the
task significantly.

In any case, next time you should choose a more meaningful
subject for your question.