XSLT Mapping: Namespace for prefix 'ns0' has not been declared

Question

Hello, I am working on a synchronous SOAP call and having some trouble with the response message. The web service has its own namespace and I am trying to convert this to my custom data type in PI. PI wants the message to be in format of having ns0 prefix and namespace like we have defined (http://foo for example).
I have an XSLT mapping (see below) which works fine with my test response payload (pulled from SXMB_MONI source) on this online XSLT test site:
http://www.freeformatter.com/xsl-transformer.html
However when I import this archive to PI and test with operation mapping it always says "Namespace for prefix 'ns0' has not been declared."
This is very confusing because when I test it online, I see both prefix and namespace declaration perfectly. Is there a way to see the results in the PI test tool? After this XSLT java error it doesn't give me the output even in Trace Level All mode.
Please advise on this issue or if you know an easier way (such as altering my datatype/message type to match the inbound SOAP message). I tried working with the 3rd party WSDL but the response message types show a different root level node than what PI is receiving so I gave up to make my own matching datatype. I just have to solve this last inbound namespace issue and should be finished.
FYI I have refreshed all PI caches and activated all objects.
Thanks for your ideas!
<xsl:stylesheet version="1.0"
xmlns:xsl="http://www.w3.org/1999/XSL/Transform"
xmlns:ns0="http://foo"
  <xsl:output method="xml" indent="yes" omit-xml-declaration="yes"/>
  <xsl:template match="@* | node()">
    <xsl:copy>
      <xsl:apply-templates select="@* | node()"/>
    </xsl:copy>
  </xsl:template>
  <xsl:template match="/*">
    <xsl:element name="ns0:{local-name()}">
      <xsl:apply-templates select="@* | node()" />
    </xsl:element>
  </xsl:template>
  <xsl:template match="/">
    <xsl:element name="{local-name()}">
      <xsl:apply-templates select="@* | node()" />
    </xsl:element>
  </xsl:template>
</xsl:stylesheet>

Answer 1

Some additional info, here is an example payload which goes through the XSLT mapping perfectly, but in PI I get the error about missing ns0 declaration.
XML input:
<bar xmlns='http://irrelevantnamespace'
xmlns:soap='http://schemas.xmlsoap.org/soap/envelope/'
xmlns:xsd='http://www.w3.org/2001/XMLSchema'
xmlns:xsi='http://www.w3.org/2001/XMLSchema-instance'>
<foo/>
</bar>
XSLT mapped output using test tool and XSL above:
<?xml version="1.0" encoding="UTF-8"?>
<ns0:bar xmlns:ns0="http://foo">
   <foo />
</ns0:bar>