In summary then, when building a string in a variable and you want to
avoid document node creation it's preferable to use item()+ than
xs:string+ as that allows the merging of adjacent text nodes before
atomization, creating a sequence of one item therefore bypassing the
separator issue?

<xsl:variable name="foo" as="item()+">
  <xsl:text>abc</xsl:text><xsl:value-of select="'def'"/>
</xsl:variable>

<xsl:template match="/">
  <xsl:value-of select="$foo"/>
</xsl:template>

Gives the required 'abcdef'

<xsl:variable name="foo" as="xs:string+">
  <xsl:text>abc</xsl:text><xsl:value-of select="'def'"/>
</xsl:variable>

<xsl:template match="/">
  <xsl:value-of select="$foo"/>
</xsl:template>

Gives the unwanted 'abc def'

Hmmmmmmm...