Sorry I misunderstood your requirement. You can get the first book in each record by writing (with a <record> as the context node):
select="item[1]/book"
You can display "BOOK1 BOOK2" (again with a <record> as the context node):
<xsl:value-of select="item/book"/>
For the latter make sure your stylesheet specifies version="2.0" otherwise you will get 1.0 mode which outputs only the first book.
Michael Kay
http://www.saxonica.com/
Author, XSLT Programmer's Reference and XPath 2.0 Programmer's Reference