The performance of available XSLT translation engines would be a big consideration for me, especially in a hot-reload context to support fast iterations.
That was my first thought: no XSLT 3 engine that I know of keeps an in-memory object that supports iterative retemplating on diff changes to the source. I think the closest to this is in the functional communities and their lenses. Given how "far" XSLT can reach through a document via Xpath, I don't think it's an easy-to-solve problem.
