I have a variable containing
...
and some xml (document('../blah.xml') containing...
...

It would help next time if you could supply the
code that you already have so that it takes less time for others to modify
it.

How do I  <xsl:apply-templates select="$variable/Records/Record[1]" />
only those records which are neccesary="yes"  ?

I'm not sure what you are asking, are you asking
what principles to use, or are you asking someone
to supply you with an answer?  Below is an
answer, though I'm not sure what aspect of the
problem you are having issues with that caused
you to ask the question to the list.

t:\ftemp>type blah.xml
<?xml version="1.0" encoding="US-ASCII"?>
<activities>
  <activity necessary="no">Baseball</activity>
  <activity necessary="no">Shopping</activity>
  <activity necessary="yes">Writing</activity>
</activities>

t:\ftemp>type steve3.xsl
<?xml version="1.0" encoding="US-ASCII"?>
<xsl:stylesheet xmlns:xsl="http://www.w3.org/1999/XSL/Transform"
                version="2.0">

<xsl:key name="activities" match="activity" use="@necessary"/>
<xsl:key name="records" match="Record" use="activity"/>

<xsl:template match="/">
  <xsl:variable name='records'>
    <Records>
      <Record>
        <activity>Baseball</activity>
        <hours>36</hours>
      </Record>
      <Record>
        <activity>Shopping</activity>
        <hours>39</hours>
      </Record>
      <Record>
        <activity>Writing</activity>
        <hours>3</hours>
      </Record>
    </Records>
  </xsl:variable>

  <xsl:apply-templates
    select="key('records',
                key('activities',
                    'yes',
                    document('blah.xml')),
                $records)"/>
</xsl:template>

<xsl:template match="Record">
  <xsl:value-of select="'Activity: ',activity,', hours=',hours"
                separator=""/>
  <xsl:text>
</xsl:text>
</xsl:template>

</xsl:stylesheet>
t:\ftemp>xslt2 steve3.xsl steve3.xsl con
Activity: Writing, hours=3

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