I have seen a lot of XML editors coming out, and there are some that are very good. For me at least, developing the XSL has been more difficult than developing the XML document and its defining document. I am really wondering when we will see an application that will do both XML and XSL?
I've personally found that the ODI Excellon XSL Editor is perhaps one of the best on the market. It uses a set of editor windows reminiscent of Visual Basic's function editor to help you write XSL. It also will let you validate against both formal XSLT and the older IE XML parser, and it lets you preview your results against any XML. While you could write XML in it, that's not really where it's at its strongest.