XSLT creates HTML in the form of a result tree; the processor then looks after the job of serializing this as textual HTML (in fact, some browsers do the rendering directing from the tree, never creating the textual HTML as an intermediate form).
So you need to write a BR element, not the four characters "<BR>". The way you do that is to write <BR/> in your stylesheet.
Michael Kay
http://www.saxonica.com/
Author, XSLT Programmer's Reference and XPath 2.0 Programmer's Reference