Andrew Lindesay has just published an article on Stepwise detailing his use of XSLT in WebObjects.
It's quite in-depth, and has some great background info on how to get it all working together. This would have been quite handy a couple of months ago... ;-) Some really nice and clear documentation, including lots of shiny diagrams.
It looks like he's taking a slightly different tact than I am. He's replacing the .html for a WOComponent with an XML string, leaving the .wod string in place as normal. I'm going one step further, and generating both .html and .wod from the single .xml source.
Hopefully he'll post his sample .xsl file so we can see his take on it.