Although I say it myself, my own Saxon product is by far the most widely used XSLT 2.0 processor today, and it's in Java.
The basic version Saxon-B is open source at
http://saxon.sf.net/, and there's also a commercial version (which adds schema-awareness and a number of other features for enterprise users) at
http://www.saxonica.com/
Michael Kay
http://www.saxonica.com/
Author, XSLT Programmer's Reference and XPath 2.0 Programmer's Reference