Your solution to grouping where an element overlaps two groups is
  impressive, but how would you handle the case where a text node (with
  two newlines) overlaps three groups? It seems like the looping concept
  breaks down

maybe our posts crossed but i think the version I posted yesterday works
in that case doesn't it? My test case (in the post) had two newlines:

<page>
    <bodytext>This is the <link url="zzz">link</link> xxx      <---1---
    This is another line                                       <---2---
    and a <link url="zzz">link2</link> 2nd
    and a third</bodytext>
</page>

David

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