How can I do the following restructuring? Do I need to use grouping?

Inside and outside of my <doc> node there are <fragment> nodes. I want
to collect them all and place them insde a new <fragments> tag.

You could use grouping but it's not necessary.
I think this will do:

<xsl:stylesheet version="1.0"
xmlns:xsl="http://www.w3.org/1999/XSL/Transform">

<xsl:template match="root">
	<xsl:copy>
		<doc>
			<fragments>
				<xsl:copy-of select=".//fragment"/>
			</fragments>
		</doc>
	</xsl:copy>
</xsl:template>

regards,
--
Joris Gillis (http://www.ticalc.org/cgi-bin/acct-view.cgi?userid=38041)
"Et ipsa scientia potestas est"  - Francis Bacon , Meditationes sacrae