The <xsl:fallback> instruction element is instantiated when its enclosing extension element is undefined; however, <xsl:fallback>, simply inserting them at the same hierarchy level as the <xsl:fallback> element, it instead appends them to the root node. So appending to the root node is not happening.

Sample template:

  <xsl:template match="/">
    <xsl:variable name="ns-temp-1">
      <parent>
        <older-sibling/>
        <test:test>
          <xsl:fallback>
            <middle-sibling/>
          </xsl:fallback>
        </test:test>
        <younger-sibling/>
      </parent>
    </xsl:variable>
    <xsl:variable xmlns:exslt-ext="http://xmlsoft.org/XSLT/namespace" name="ns" select="exslt:node-set($ns-temp-1)"/>
    <xsl:for-each select="$ns/*">
      <output>
        <xsl:value-of select="concat(&quot;Name: &quot;, name())"/>
      </output>
      <xsl:for-each select="./*">
        <output>
          <xsl:value-of select="concat(&quot;    Child name: &quot;, name())"/>
        </output>
      </xsl:for-each>
    </xsl:for-each>
  </xsl:template>


Above template results in:

Name: parent
    Child name: older-sibling
    Child name: younger-sibling
Name: middle-sibling