Your source document is in a namespace:
<PMML version="3.0" xmlns="http://www.dmg.org/PMML-3_0"
so you need to qualify all names with a prefix:
<xsl:stylesheet
xmlns:pmml="http://www.dmg.org/PMML-3_0"
<xsl:template match="pmml:PMML">
...
In XSLT 2.0 you can say xpath-default-namespace="http://www.dmg.org/PMML-3_0"
on the xsl:stylesheet element (or elsewhere)
Michael Kay
http://www.saxonica.com/
Author, XSLT Programmer's Reference and XPath 2.0 Programmer's Reference