oops I grouped the wrong thing, try

<xsl:stylesheet version="2.0" xmlns:xsl="http://www.w3.org/1999/XSL/Transform">
  <xsl:output indent="yes"/>
  <xsl:template match="rowset">
    <xsl:for-each-group select="row/*" group-by="name()">
      <xsl:sort select="name()"/>
      <select name="{current-grouping-key()}">
	<xsl:for-each-group select="current-group()" group-by=".">
	  <xsl:sort/>
	  <option><xsl:value-of select="."/></option>
	</xsl:for-each-group>
      </select>
    </xsl:for-each-group>
  </xsl:template>
</xsl:stylesheet>

$ saxon8 rs.xml rs2.xsl
<?xml version="1.0" encoding="UTF-8"?>
<select name="color">
   <option>Blue</option>
   <option>Red</option>
</select>
<select name="make">
   <option>Toyota</option>
</select>
<select name="model">
   <option>Corolla</option>
   <option>Yaris</option>
</select>


<xsl:stylesheet version="1.0" xmlns:xsl="http://www.w3.org/1999/XSL/Transform">
  <xsl:output indent="yes"/>
  <xsl:key  name="n" match="*" use="name()"/>
  <xsl:key  name="v" match="*" use="concat(name(),.)"/>
  <xsl:template match="rowset">
    <xsl:for-each select="row/*[generate-id(.)=generate-id(key('n',name()))]">
      <xsl:sort select="name()"/>
      <select name="{name()}">
	<xsl:for-each select="../../row/*[generate-id(.)=generate-id(key('v',concat(name(current()),.)))]">
	  <xsl:sort/>
	  <option><xsl:value-of select="."/></option>
	</xsl:for-each>
      </select>
    </xsl:for-each>
  </xsl:template>
</xsl:stylesheet>


$ saxon rs.xml rs1.xsl
<?xml version="1.0" encoding="utf-8"?>
<select name="color">
   <option>Blue</option>
   <option>Red</option>
</select>
<select name="make">
   <option>Toyota</option>
</select>
<select name="model">
   <option>Corolla</option>
   <option>Yaris</option>
</select>



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