I agree that the choice of IDEs for XSLT development is not as wide as for other languages. I've had pleasant experience with XSLT-process mode for Emacs (
http://xslt-process.sf.net); it has breakpoints, step-by-step execution, variable lookup etc. Some commercial solutions also exist. However, in my opinion, the side-effect-free nature of XSLT makes traditional debugging techniques less of a necessity; in my view, you can do very well with only a text editor with a good XML editing support. My book, however, has a chapter on various kinds of XML/XSLT software where I tried to cover different scenarios and approaches.