XSLT with XML XPath references

Question

I have not used XSLT, and don't need to much, but have questions on creating XML that will be used by client's XSLT.
We are using a tool (xstream) that automatically transforms a Java object into XML. When it has multiple references to the same object, instead of expanding it in each place, it refers to the previous location of the object. It can do this in two ways (examples below).
My question is, can XSLT use the XPath or RefID to navigate the XML? I know XSLT uses XPath, but I'm not sure if it uses it in this way.
-- Note in the following examples how 'type' and 'item' are the exact same object, and the second instance of the object refers to the first location in the XML doc.
<saleLineItemGrouping>
  <item class="item">
    <id>3000</id>
    <retailPrice>
      <type>
         <code>USD</code>
         <description>US Dollars</description>
         <decimalPlaces>2</decimalPlaces>
         <locale>en_US</locale>
      </type>
      <amount>400000000</amount>
    </retailPrice>
    <markdownAmount>
      <type reference="../../retailPrice/type"/>
      <amount>0</amount>
    </markdownAmount>
  </item>
  <lineItems>
    <saleLineItem>
      <item class="item" reference="../../../item"/>
<saleLineItemGrouping id="1">
  <item class="item" id="2">
    <id>3000</id>
    <retailPrice id="3">
      <type id="4">
         <code>USD</code>
         <description>US Dollars</description>
         <decimalPlaces>2</decimalPlaces>
         <locale id="5">en_US</locale>
      </type>
      <amount>400000000</amount>
    </retailPrice>
    <markdownAmount id="6">
      <type reference="4"/>
      <amount>0</amount>
    </markdownAmount>
  </item>
  <lineItems id="7">
    <saleLineItem id="8">
      <item class="item" reference="2"/>

Answer 1

So as I read your answer, I understand XSLT cannot
"construct XPath expressions." But, can it read in
XML with that XPath notation?Sure, it can read in that XML. It's well-formed XML so why not? But I gather you want your XSLT to take those attributes, whose values are strings, and interpret those strings as XPath expressions. That, XSLT can't do.
To put it another way, the XPath expressions in an XSLT stylesheet have to be basically hard-coded there. So you could possibly solve your problem by first transforming the XML into an XSLT containing those expressions; e.g.<type reference="../../retailPrice/type"/>could be transformed into<xsl:value-of select="../../retailPrice/type"/>and then use that XSLT to do the actual transforming. But it would be extremely difficult to make that work -- I wouldn't want to have to do it myself.
The second idea, using reference="2" to refer to <item class="item" id="2">, is much more feasible.
Thank you for your replies and your patience.You're welcome. Have fun with XSLT.