> Am I right in saying the first option requires me to purchase 
> a schema aware XSLT processor?

It requires your processor to be schema-aware, yes.
> 
> The second option looks similar to the one I suggested, its 
> not really extensible when I need to make the check for list 
> | box | group at numerous places in the stylesheet. I would 
> like to define these object names in one place and then 
> reference them from numerous XPaths.

Hence my suggestion of the first option.

Michael Kay
http://www.saxonica.com/