it produces:
<?xml version="1.0" encoding="UTF-16"?>1, 1.1, 1.1.1, 1.1.2, 1.1.3, 1.2, 1.2.1, 1.3, 1.3.1, 1.3.2, 1.3.3, 1.3.4,

Looks like you use MSXML. It strips off whitespace nodes by default,
and there go your line endings in the source XML.
Either use another processor, tell MSXML not to strip whitespace
nodes (search the list archive), or, the brute method use
    <xsl:template match="viewentryl2">
        <xsl:apply-templates />
        <xsl:text>&#xA;</xsl:text>
    </xsl:template>