Graham,
I think I might have stumbled onto the problem. I don't think the result of MC's export is really encoded as UTF-8. When I changed it to UTF-16, it didn't have a problem - though I did have a problem with the XSLT. Changing the encoding again to Windows-1252 let things work just fine. I.e.:
<?xml version="1.0" encoding="Windows-1252" standalone="yes" ?>
Well... I first pruned your HUGE file of all the fields that weren't needed for the transformation AlbumGroup.xsl. This reduced the filesize from 108 MB to 30 MB. The translation took a bit of time, but certianly less than ten or fifteen minutes. Using this "pruned" XML file, the AlbumGroup XSLT takes less than a minute or two (I was a bit surprised at this!). Unfortunately, the resulting HTML is 45 MB - and this seems to be the bottleneck. IE doesn't deal well with such a large HTML document.
So I'm rethinking things a bit... how to deal with such a large HTML?
Scott-
P.S. If you want the resultant html, I'll put it on my ftp server for you.