I think one big problem with popularizing that approach is that XSLT as a language frankly sucks. As an architecture component, it's absolutely the right idea, but as long as actually developing in it is a world of pain, I don't see how people would have any incentive to adopt it.
The tragic thing is that there are other pure-functional XML transformation languages that are really well-designed - like XQuery. But there is no browser that supports those.