merge two elements using xslt based on attribute values

Question

This is how my source file looks like:

Answer 1

It's a bit ugly but it does what you want and sorry if the first time did not understand well.

<?xml version="1.0" encoding="UTF-8"?>
<xsl:stylesheet version="1.0" xmlns:xsl="http://www.w3.org/1999/XSL/Transform" xmlns:jndi="urn:jboss:jndi-binding-service:1.0"  >
    <xsl:output method="xml" version="1.0" encoding="utf-8" indent="yes" /> 
    <xsl:template match="book/book"> 
        <book>
            <mbean code="org.book.mybooks" name="mycompany.props.jndi:name=mybookprops">   
            <attribute name="bookprops">                 
                    <xsl:copy-of select="mbean/attribute/text()"/>
                    <xsl:call-template name="Mbean">
                        <xsl:with-param name="bindings" select="mbean/attribute"/>
                        <xsl:with-param name="bindingsP" select="/book/mbean/attribute/text()"/>
                    </xsl:call-template>     
             </attribute>           
            </mbean>
        </book>
    </xsl:template>   
    <xsl:template name="Mbean">
        <xsl:param name="bindings"/>
        <xsl:param name="bindingsP"/>          
            <xsl:choose>
                    <xsl:when test="contains($bindingsP,'@Value@')">
                          <xsl:if test="not(contains(substring-before($bindingsP,'@Value@'),'@Value@')) and not(contains(substring-before($bindingsP,'@Value@'),'@New_Value@')) and not(contains($bindings,concat(substring-before($bindingsP,'@Value@'),'@Value@')))">
                                <xsl:copy-of select="concat(substring-before($bindingsP,'@Value@'),'@Value@')"/>
                                <xsl:call-template name="Mbean">
                                   <xsl:with-param name="bindings" select="$bindings"/>
                                   <xsl:with-param name="bindingsP" select="substring-after($bindingsP,'@Value@')"/>
                                </xsl:call-template>
                            </xsl:if>                          
                    </xsl:when>
                    <xsl:when test="contains($bindingsP,'@New_Value@')">
                           <xsl:if test="not(contains(substring-before($bindingsP,'@Value@'),'@Value@')) and not(contains(substring-before($bindingsP,'@Value@'),'@New_Value@')) and not(contains($bindings,concat(substring-before($bindingsP,'@New_Value@'),'@New_Value@')))">
                                <xsl:copy-of select="concat(substring-before($bindingsP,'@New_Value@'),'@New_Value@')"/>
                                <xsl:call-template name="Mbean">
                                   <xsl:with-param name="bindings" select="$bindings"/>
                                   <xsl:with-param name="bindingsP" select="substring-after($bindingsP,'@New_Value@')"/>
                                </xsl:call-template>
                            </xsl:if>       

                    </xsl:when>
            </xsl:choose>    

    </xsl:template>

    <xsl:template match="text()"/>
</xsl:stylesheet>