It appears that global variable node-sets are not being handled the same as
main document node sets or node-sets brought in from an external document.
 I have included the xsl/xml combo to test it.

xsl: problem.xsl
------------------
<?xml version="1.0" encoding="UTF-8"?>
<xsl:stylesheet version="1.0"
  xmlns:xsl="http://www.w3.org/1999/XSL/Transform"
  xmlns:common="http://exslt.org/common">
<xsl:output
     method="xml"
     indent="yes"
/>
<!--
   Quick description...so what I notices was when I did apply-templates on
a node-set variable
   that I had constructed in the page, it wasn't passing the param.  Then,
I realized the
   problem was really with how it was handling these variable node-sets. 
The example is
   thorough...check it out
 -->

  <xsl:variable name="inline_nodeset">
    <node>first element</node>
    <node>second element</node>
    <node>third element</node>
  </xsl:variable>

  <xsl:variable name="document_nodeset"
select="document('problem.xml')/root/node"/>

  <xsl:template match="/">
    <xsl:element name="results">

      <xsl:element name="out">
        <xsl:attribute name="document">main_nodeset</xsl:attribute>
        <xsl:element name="description">Accessing the main document behaves
as expected</xsl:element>
        <xsl:apply-templates select="root/node">
          <xsl:with-param name="foo">bar</xsl:with-param>
        </xsl:apply-templates>
        <xsl:element name="reference_by_position_example">
          <xsl:copy-of select="root/node[1]"/>
        </xsl:element>
      </xsl:element>

      <!-- notice for the nodeset created in the stylesheet, it is
necessary to access
           it differently than the other two (1&3) nodesets in this
stylesheet...taking off
           the reference to "node" in both of these causes serious problems -->
      <xsl:element name="out">
        <xsl:attribute name="document">inline_nodeset</xsl:attribute>
        <xsl:element name="description">Accessing an inline nodeset behaves
differently than both main document nodesets and nodesets pulled in from
another file</xsl:element>
        <!-- this way does not work, it does not pass the param value -->
        <xsl:apply-templates select="common:node-set($inline_nodeset)">
          <xsl:with-param name="foo">bar</xsl:with-param>
        </xsl:apply-templates>
        <!-- this way works, it passes the param value (both ways pass the
selected node -->
        <xsl:apply-templates select="common:node-set($inline_nodeset)/node">
          <xsl:with-param name="foo">bar</xsl:with-param>
        </xsl:apply-templates> -->
        <xsl:element name="reference_by_position_example">
          <!-- this way works, take off the word "node" at the end and
segfault -->
          <xsl:copy-of select="common:node-set($inline_nodeset)/node[1]"/>
        </xsl:element>
      </xsl:element>
      <xsl:element name="out">
        <xsl:attribute name="document">document_nodeset</xsl:attribute>
        <xsl:element name="description">Accessing a nodeset pulled from a
document behaves just as
a nodeset from the main document</xsl:element>
        <xsl:apply-templates select="common:node-set($document_nodeset)">
          <xsl:with-param name="foo">bar</xsl:with-param>
        </xsl:apply-templates>
        <xsl:element name="reference_by_position_example">
          <xsl:copy-of select="common:node-set($document_nodeset)[1]"/>
        </xsl:element>
      </xsl:element>
    </xsl:element>

<!--
   Now, run the next line all by itself in this template and see that the
output is
   just garbage.  Technically, if you create a result tree fragment like
above, this
   should just be a node-set of 3 nodes, so accessing the node at position
one can be
   done as follows ...

    <xsl:copy-of select="common:node-set($inline_nodeset)[1]"/>

 -->
  </xsl:template>

  <xsl:template match="node">
    <xsl:param name="foo"/>
    <xsl:element name="match">
      <xsl:attribute name="param"><xsl:value-of select="$foo"/></xsl:attribute>
      <xsl:value-of select="current()"/>
    </xsl:element>
  </xsl:template>

</xsl:stylesheet>

xml: problem.xml
-----------------
<?xml version="1.0" encoding="utf-8"?>
<root>
  <node>first element</node>
  <node>second element</node>
  <node>third element</node>
</root>

Dan Allen