We are having the same issue and would like to know if you found a solution.
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The XSLT service is configurable.
1) Stop LiveCycle.
2) Add the .jars of your XSLT processor of choice to the LiveCycle server lib folder.
3) Restart LiveCycle.
4) Go to Workbench and stop the XSLT service. Right-click on XSLTService:1.0 and Edit Service Configuration.
5) Enter the factory name for the given XSLT processor. I think for Xalan 2.7.1 it is org.apache.xalan.processor.TransformerFactoryImpl (but I could be wrong).
6) Restart the service.
I did something very similar, but specified the factory name in the workspace step instead of doing it globally. (I used the Saxon library) It would work once but after that the workflow would fail. I would try to record the process and it would show up as a blank recording when trying to replay the process. Also when invoking the process through workbench it would indicate the process finished with no output variables (When in fact I did).
To solve this issue I went the route of the following blog (http://www.martinkremers.de/blog/?p=387). I updated the example to use ES2 and everything is now working correctly.