How do I put the proper test in for the first Node I encounter, add a
top border:?

    <xsl:template match="category">
        <xsl:choose>
            <xsl:when test="first::category">

If you want to test whether an element node is the first one in a given
node-set, you can proceed as follows:

<xsl:transform version="1.0"
  xmlns:xsl="http://www.w3.org/1999/XSL/Transform">
  <xsl:output method="text"/>
  <xsl:template match="/">
    <xsl:apply-templates select="//Elm"/>
  </xsl:template>
  <xsl:template match="Elm[1]">
    <xsl:text>first one&#10;</xsl:text>
  </xsl:template>
  <xsl:template match="Elm">
    <xsl:text>not the first one&#10;</xsl:text>
  </xsl:template>
</xsl:transform>