This translates directly into an xsl:choose:
<xsl:choose>
<xsl:when test="/response/transaction/returnCode = ('98', '99')">
<rtncode>0FF</rtncode>
</xsl:when>
<xsl:when test="/response/transaction/returnCode = ('01', '02')">
<rtncode>HFL</rtncode>
</xsl:when>
etc.
I've used the XPath 2.0 notation X=(a,b) here -- in XPath 1.0 you need to expand this to (X=a or X=b). Whether it's 1.0 or 2.0, if X selects multiple nodes then the condition is true if any of them match.
Michael Kay
http://www.saxonica.com/
Author, XSLT Programmer's Reference and XPath 2.0 Programmer's Reference