I had some XSLT stylesheets with indent="no", and the fix of bug 652766 introduced a change in the behavior. For instance, for the following "copy.xsl" file:

<?xml version="1.0" encoding="utf-8"?>
<!-- Comment 1 -->
<!-- Comment 2 -->

<xsl:stylesheet version="1.0"
                xmlns:xsl="http://www.w3.org/1999/XSL/Transform">

<xsl:output method="xml" indent="no"/>

<xsl:template match="node()|@*">
  <xsl:copy>
    <xsl:apply-templates select="node()|@*"/>
  </xsl:copy>
</xsl:template>

</xsl:stylesheet>

I get with bash:

vinc17@xvii:~$ xsltproc copy.xsl copy.xsl
<?xml version="1.0"?>
<!-- Comment 1 --><!-- Comment 2 --><xsl:stylesheet xmlns:xsl="http://www.w3.org/1999/XSL/Transform" version="1.0">

<xsl:output method="xml" indent="no"/>

<xsl:template match="node()|@*">
  <xsl:copy>
    <xsl:apply-templates select="node()|@*"/>
  </xsl:copy>
</xsl:template>

</xsl:stylesheet>vinc17@xvii:~$ 

The missing newline character after each top-level node (comments, processing instructions, root element, and also the DOCTYPE line when there is one) is rather annoying for various reasons: readability, mandatory newline at the end of the file to regard it as a POSIX text file, usability with line-based tools, such as "diff" (to compare generated output), "svn blame" and so on...

It appears that removing the indent="no" allows one to get the old behavior for the top-level nodes, while still avoiding indentation in the contents (which is not always safe for some applications). I think that it is OK, though it may be a bit confusing as the XSLT spec[*] says that the default indent value is no (I don't think different behavior between indent="no" and no indent attribute is incorrect, since whitespace between top-level nodes is unspecified by the XSLT spec, as having no influence on how the XML document is to be interpreted). But this should be documented; currently it isn't in the man pages at least.

[*] http://www.w3.org/TR/xslt says: "If the indent attribute has the value yes, then the xml output method may output whitespace in addition to the whitespace in the result tree (possibly based on whitespace stripped from either the source document or the stylesheet) in order to indent the result nicely; if the indent attribute has the value no, it should not output any additional whitespace. The default value is no."

BTW, related to this, one doesn't get a newline character after a top-level processing instruction, even if indent="no" isn't used. This is bug 439825.