_Alternative 1:__
_
fn:fold-left(
  0,
  function($distance, $code-diff)
    {
      if ($code-diff) then $distance + 1
                      else $distance
    },
  let $c1 := string-to-codepoints($pStr1),
      $c2 := string-to-codepoints($pStr1) return
  for $i in 1 .. min(count($c1),count($c2)) return
    $c1[$i] - $c2[$i]
  )

_count(
  let $c1 := string-to-codepoints($pStr1),
      $c2 := string-to-codepoints($pStr1) return
  for $i in 1 .. min(count($c1),count($c2)) return
    1[$c1[$i] eq $c2[$i]]
    )

Faithfully,
Sean B. Durkin

Dear XSLT professionals,

In case you are interested in solving the Word Ladders problem first
formulated by Lewis Carroll, or just in an XSLT solution of the "Find
shortest path in graph" problem, you might be interested to have a
look at the implementation in my latest blog post:

http://dnovatchev.wordpress.com/2012/11/26/word-ladders-or-how-to-go-from-angry-to-happy-in-20-steps/

Any feedback about this implementation and suggestions for further
optimization are welcome.