The problem is, with the following, I get validation errors:

Nitpick: this is a "well-formed" error, IOW the style sheet is
not well formed XML:

      <xsl:if test="position() mod 2 = '0'">
         </topgroup>

This closes a "topgroup" element without any open element
of this type. Yeah, the error message could be a bit more
intelligent (complain to the Xalan-C maintainers).

Just do it right:
  <xsl:if test="position() mod 2 = '0'">
     <topgroup>
     </topgroup>
  </xsl:if>