> > >  <xsl:template match="indexterm">
> > >     <indexterm>
> > >        <xsl:value-of select="translate(.,'&#x20;','&#x26;')"/>
> > >     </indexterm>
> > >  </xsl:template>
> > >

are you sure that that template is ever being executed?, add
<xsl:message>I am here</xsl:message>
or change it to

<xsl:template match="indexterm">
     <indexterm>
      old[<xsl:value-of select=".)"/>]
      new[<xsl:value-of select="translate(.,'&#x20;','&#x26;')"/>]
    </indexterm>


it may be that a higher priority template is being executed, or it's a
namespace issuee, or....

David

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