Nothing in the code you have shown us is creating a result tree fragment,
though it's possible that $local is an RTF, since you haven't shown us its
declaration. 

> After reading the FAQ it said
> that assigning existing variables to parameters turns
> them into RTF.  But, when I tried replacing them with
> expressions rather than $var it still ended up a RTF. 

I'm tempted to ask what the FAQ said before you read it...

Seriously though, you must have misread it. RTFs are created only by an
xsl:variable, xsl:param, or xsl:with-param element that has child
instructions rather than a select attribute.

Also, what exactly was the error message? It's better to quote it literally,
especially if you don't fully understand it.

Michael Kay
http://www.saxonica.com/