When you use XSLT to generate XML, there is no guarantee that the resulting XML will be well-formed, that is, that it will have a single element node as the document element. You can generate XML with no top-level elements or with multiple top-level elements. If you do that (as you have done) then IE will not be able to display it. It's best always to generate well-formed XML, which you can do by adding the template rule:
<xsl:template match="ROWSET">
<doc>
<xsl:apply-templates/>
</doc>
</xsl:template>
Michael Kay
http://www.saxonica.com/
Author, XSLT Programmer's Reference and XPath 2.0 Programmer's Reference