I know that this is basic but I cannot get it done correctly.

Input:
<lines>
   <line></line>
   <line>A1</line>
   <line>1</line>
   <line>B1</line>
   <line></line>
   <line>A2</line>
   <line>2</line>
   <line>2</line>
   <line>2</line>
   <line>B2</line>
   <line></line>
   <line></line>
</lines>

Intended output (blockwise, start at A, all including next B):
<line>A1</line>
<line>1</line>

<line>A2</line>
<line>2</line>
<line>2</line>
<line>2</line>

<xsl:stylesheet
  xmlns:xsl="http://www.w3.org/1999/XSL/Transform"
  version="1.0">

  <xsl:template match="@* | node()" name="identity">
    <xsl:copy>
      <xsl:apply-templates select="@* | node()"/>
    </xsl:copy>
  </xsl:template>

  <xsl:template match="lines">
    <xsl:apply-templates select="line[starts-with(., 'A')]"/>
  </xsl:template>

  <xsl:template match="line[starts-with(., 'A')]">
    <xsl:call-template name="identity"/>
    <xsl:apply-templates select="key('k1', generate-id())"/>
  </xsl:template>

I am however not sure whether the condition used
  "and node()"
is what you want.

	Martin Honnen
	http://msmvps.com/blogs/martin_honnen/