We use server-side XSLT at work. We use it as a file based CMS. Our XML is an HTML-abstraction and transforms to Bootstrap. Site has ~12000 single pages.
While I love it, I always wonder if others might think I am crazy.
I don't think your crazy, in fact I've gone looking for such systems in the past while researching static site generators and wanting a more universal solution to let me pull in remote content as xml and json.
I would love to hear more about the system you work with.
Within the abstraction, each of our "Elements" has his own XSL stylesheet containing the whole transformation of it. So for developers, it's easy to navigate the code. All elements are compatible with each other.
We've a task running in the background that groups all element into a single XSL stylesheet.
Within Apache Cocoon, you can setup a transformation pipeline. The "elements" will be applied in one step, other steps take care of i18n, i10n and "custom pages"/widgets.
Our documentation is written in that setup, too. We've also setup automated tests for our ~60 custom written EXSLT functions.
[1]: https://en.wikipedia.org/wiki/Document_Style_Semantics_and_S...