Hello Michael,
I'm not sure I understood the '+' in  <xsl:for-each
select+"current-group()">

I tried the below template. [1] gives me the <Stamp> elements grouped under
<Date> but not sorted by value. [2] gives me the <Stamp> elements sorted by
value but not grouped under <Date>. Clearly I am missing something as I am
quite week in XPath. Where am I going wrong.

The code below does what you need.  Directly within the for-each-each
group the context is the sequence of <Stamp> elements all with the
same year/month/day.  The sort there sorts on that value.  Then the
for-each inside there processes that seqeunce (that all have the same
year/month/day one at a time, sorted by the value.  I've used a
different wrapper element for each group to help show what is going
on.

<xsl:template match="List">
 <xsl:element name="List">
   <xsl:for-each-group select="Item/Stamp"
group-by="Date/concat(@year, @month, @day)">
     <xsl:sort select="current-grouping-key()" data-type="number"/>
       <xsl:element name="Group{position()}">
         <xsl:for-each select="current-group()">
           <xsl:sort select="@value" order="descending"
data-type="number"></xsl:sort>
           <xsl:copy-of select="." copy-namespaces="no"/>
        </xsl:for-each>
     </xsl:element>
   </xsl:for-each-group>
 </xsl:element>
</xsl:template>

--
Andrew Welch
http://andrewjwelch.com