How do I use XSLT 2.0 in SharePoint? Do I need to install some package on the server to make it work? Or is it available by default, and I just start using it?

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SharePoint only supports Version 1.0 of XSLT. As far as I know, there's no way to update it and there are now changes in newer SharePoint-Versions. More information about this can be found here: http://social.msdn.microsoft.com/Forums/sharepoint/en-US/5727818f-72b3-4476-b255-8ff2b6d22b2c/xslt-and-xpath-20-supported-in-spd-2007-and-moss-2007

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