I'm afraid it's very hard to understand your question. I don't understand what you mean by "grouping" - it doesn't seem related to the usual use of the term in XSLT. You have shown an element declaration that permits a list of possible children such as emph, sub, etc: you can of course write template rules to process these elements.
XSLT stylesheets have no access to the DTD. Of course, when you write a stylesheet then you will design it to handle a particular input structure, but that's the only way the DTD comes into it.
I'm not sure what you mean by a "dynamic XSLT", and if the following is a question "When I came across grouping I got with breaking outputs when I introduce other grouping element inside a grouping." then I'm afraid I don't know what it's asking.
Michael Kay
http://www.saxonica.com/
Author, XSLT Programmer's Reference and XPath 2.0 Programmer's Reference