I was already writing about the logical difference between tamplates and functions. This time I've realized another, technical one. It's related to lazy evaluation, permitted by language specification.

I was arguing as follows:

• suppose you define a function returning a sequence;
• this function at final step constructs document using xsl:result-document;
• caller invokes this function and uses only first item of sequence;
• lazy evaluation allows to xslt processor to calculate first item only, thus to avoid creation of output document altogether.

This conclusion looked ridiculous to me, as it means that I cannot reliably expect creation of documents built with xsl:result-document instruction.

To resolve the issue I've checked specification. Someone has already thought of this. This is what specification says:

As you can see, xsl:function is always evaluated in temporary output state, and cannot contain xsl:result-document, in contrast to xsl:template, which may be evaluated in final output state. This difference dictates the role of templates as a "top level functions" and functions as standalone algorithms.

You can find more on subject at "Lazy evaluation and predicted results".