I now have Saxon 8.5b processing a directory of xml files and generating the
required html files, using the following: 

<xsl:for-each select="collection(concat($xmlDir, '?select=*.xml'))">
	<xsl:result-document href="{$outputDir}/{$fileName}.html">
	  ...
	</xsl:result-document>
	<xsl:for-each select="saxon:discard-document(.)" />
</xsl:for-each>

-Am I using saxon:discard-document() correctly... Seems odd?

-Is it possible to continue the processing should one of the source files
contain an error (say a parse error)?  

For example, using a compiled stylesheet and a host language you could
continue processing the good files - it would be good to recreate that here
if possible.

cheers
andrew