<root>
    <element>
        <h1>h1</h1>
        <h2>h2</h2>
        <para>para</para>
        <para>para<emp>auszeichnung</emp></para>
        <para>para</para>
        <para>para</para>
        <para>para</para>
        <h2>h2</h2>
        <para>para</para>
        <h3>h3</h3>
        <para>para</para>
        <h5>h5</h5>
        <para>para</para>
        <para>para<emp>auszeichnung</emp></para>
        <para>para</para>
        <h4>h4</h4>
        <para>para</para>
        <para>para</para>
        <h2>h2</h2>
        <para>para</para>
        <para>para</para>
        <para>para</para>
        <h3>h3</h3>
        <para>para<emp>auszeichnung</emp></para>
        <para>para</para>
        <para>para</para>
        <h4>h4</h4>
        <para>para</para>
        <para>para</para>
        <h5>h5</h5>
        <para>para</para>
        <para>para<emp>auszeichnung</emp></para>
        <para>para</para>
    </element>
</root>

<?xml version="1.0" encoding="UTF-8"?>
<xsl:stylesheet xmlns:xsl="http://www.w3.org/1999/XSL/Transform"
version="2.0">
    <xsl:output indent="yes"/>
    <xsl:template match="/">
        <set>
            <book>
                <bookinfo/>
                <xsl:apply-templates/>
            </book>
        </set>
    </xsl:template>

    <xsl:template match="element">
        <xsl:apply-templates select="h1|h2[1]"/>
    </xsl:template>

    <xsl:template match="h1">
        <title>
            <xsl:apply-templates/>
        </title>
    </xsl:template>

    <xsl:template match="h2">
        <chapter>
            <title>
                <xsl:apply-templates/>
            </title>

            <xsl:for-each-group select=".|following-sibling::*"
group-starting-with="h2|h3|h4|h5">

                <xsl:variable name="para-content">
                    <xsl:copy-of select="current-group()[self::para]"/>
                </xsl:variable>

                <xsl:choose>
                    <xsl:when test="position()=1">
                        <xsl:copy-of select="current-group()[self::para]"/>
                    </xsl:when>

                    <xsl:when test="current-group()[name()='h2']">
                            <title>
                                <xsl:apply-templates/>
                            </title>
                            <xsl:copy-of select="$para-content"/>
                    </xsl:when>

                    <xsl:when test="current-group()[name()='h3']">
                        <xsl:element
name="sect{number(substring-after(name(.),'h'))-2}">
                            <title>
                                <xsl:apply-templates/>
                            </title>
                            <xsl:copy-of select="$para-content"/>
                        </xsl:element>
                    </xsl:when>

                    <xsl:when test="current-group()[name()='h4']">
                        <xsl:element
name="sect{number(substring-after(name(.),'h'))-2}">
                            <title>
                                <xsl:apply-templates/>
                            </title>
                            <xsl:copy-of select="$para-content"/>
                        </xsl:element>
                    </xsl:when>

                    <xsl:when test="current-group()[name()='h5']">
                        <xsl:element
name="sect{number(substring-after(name(.),'h'))-2}">
                            <title>
                                <xsl:apply-templates/>
                            </title>
                            <xsl:copy-of select="$para-content"/>
                        </xsl:element>
                    </xsl:when>
                </xsl:choose>
            </xsl:for-each-group>
        </chapter>
    </xsl:template>
</xsl:stylesheet>

Each sect2 should be child of sect1, sect3 should be child of sect2,
sect3 should be child of sect4 and sect4 should be child of sect5. Is
this possible with the stylesheet above or do I need to rethink my
approach?

<xsl:template match="emp">
 <emphasis role="bold">
  <xsl:apply-templates/>
 </emphasis>
</xsl:template>

Thanks for helping me,
Andreas