Browsers: Both IE6 and Mozilla include excellent XSLT support. I don't know exactly when Netscape started building NS6 with XSLT support, but Mozilla in general has excellent support.
Dynamic XSLT creation: IE supports a proprietary <xsl:script> tag last I heard, which I would assume would allow you to use Javascript to dynamically create an XSLT sheet, but I've never used it so I can't say.
Including Javascript in an XHTML result document: Of course.