<xsl:when test="current-group()/p">

That tests as true if any item in the current group has a p child.
In your example all the items are p or b children of <root> and none of
them have a p child, so it always tests as false.

You want "current-group()/self::p which asks if any item is a p rather
tahn having a p child, or since that is essentially your grouping key
you can just use

test="curent-grouping-key()"