Finally, with some additional help from David, I got it working.

<?xml version="1.0" encoding="UTF-8"?>
<xsl:stylesheet xmlns:xsl="http://www.w3.org/1999/XSL/Transform" version="2.0">
   
    <xsl:template match="*" mode="pass1">
        <xsl:copy>
            <xsl:copy-of select="@*"/>
            <xsl:apply-templates mode="#current"/>
        </xsl:copy>
    </xsl:template>
    
    <xsl:template match="reg[@href]" mode="pass1">
        <xsl:variable name="x" >
            <xsl:copy-of select="//regdef[@name=current()/@href]/*"/>
         </xsl:variable>
        <xsl:apply-templates select="$x" mode="#current"/>
    </xsl:template>
    
    <xsl:template match="regdef" mode="pass1"/>
        
    <xsl:template match="reg" mode="pass2">
        <br/>Register = <xsl:value-of select="."/>
           Parent Offset = <xsl:value-of select="../@offset"/>
           Sibling count = <xsl:value-of  select="count(preceding-sibling::reg)"/>
     </xsl:template>
    
    <xsl:template match="/">
        <xsl:variable name="x">
            <xsl:apply-templates mode="pass1"/>
        </xsl:variable>
        <xsl:apply-templates mode="pass2" select="$x"/>
    </xsl:template>
    
</xsl:stylesheet>


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