XInclude processing is something that might be done by the XML parser or by
some intermediate processor before the XSLT transformation starts. The spec
says nothing about how parsing is done, it's up to products to provide the
configuration options they think users will need.

There's nothing in the JAXP spec about it (the JAXP transformation spec
predates XInclude).

Saxon has configuration options allowing you to request XInclude processing
- but it only works if you're using the Xerces parser. (And possibly on
.NET, I don't recall).

No, works on your Java setup as well. As long as the jar in in
the classpath.

--
Dave Pawson
XSLT XSL-FO FAQ.
http://www.dpawson.co.uk