I think if you set indent="no" in the xsl:output tag of your XSL, it
removes all the extra white spaces between the XML nodes (I tested
this a while ago, if my memory is right then it should work).

no, indent="no", which is the default behaviour in the xml output
method, never removes white space, it simply tells the processor not to
add any extra white space.

The poster was looking for <xsl:strip-space elements="*"/>and the XPath
normalize-space() function.

<xsl:template match="node() | @*">
   <xsl:copy>
       <xsl:apply-templates select="@* | node()" />
   </xsl:copy>
</xsl:template>

<xsl:template match="text()">
   <xsl:value-of select="normalize-space(.)" />
</xsl:template>