... Actually, let me correct myself: the newlines within the attibute value do get normalized during parsing, but that should generally turn them into spaces unless datatypes from the DTD or schema are imposing other normalizations. (See http://www.w3.org/TR/REC-xml#AVNormalize)
To check what's happening, we should try running this document through some of the parser tests. If those don't show the whitespace this would suggest a parser problem, if they do then it may indeed be a Xalan glitch.
