> To store an external XML doc in a variable am I right in saying I should use 
> document-node() ?

yes

> To store an nodeset taken from the XML in a variable I should use item()?

XPath2 doesn't have node sets (They are the XPath1 datatype) it has
sequences. The nearest type to a node set is a sequence of nodes which
is node()*. If you need to store a sequence of nodes you can use node()*
but if your "nodeset" is just a single top level element then you can
use more specific types such as node() or element().

> Then what is the node() 

see above

> type for and how is it different from item()?

item() includes atomic types such as integers so 1 (an integer) and "1"
(a string) are both of type item() but not of type node() the type 
item()*
is a sequence of items and is the most general type, all XPath2 values
match that type.

David

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