Xalan is using the Xerces incremental-parse feature. The API for that changed in Xerces2, and we haven't yet updated Xalan to know how to deal with the new version. I'm starting to investigate that; somewhere in my mail logs I've got a discussion of what would have to change.
Unfortunately, because the old calls were removed entirely, we're going to have to use reflection in order to compile cleanly while supporting both versions of Xerces. What I'd _rather_ see, if we could talk the Xerces folks into it, would be to have the old methods restored but deprecated; that would let us use a simple "if" instead, and phase out the Xerces1 support at a later date after everyone has had a chance to upgrade to the latest-and-greatest parser. (I don't even insist that the deprecated calls _work_, though that would be a useful bonus; I just want to be able to compile and link successfully.) Any chance of my talking the Xerces team into this?