In other words, if I don't immediately output the results of
xsl:copy, then memory consumption grows and grows. Yes?

Potentially yes. But not really because of the xsl:copy, if you changed
it to xsl:sequence you'd probably get the same behaviour. If you are
using lots of variables and don't want them to take up space, you need
to have a very good idea how your xslt processor's optimiser works and
constrain your usage to uses which the optimiser can optimise away....

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