For anyone who had as little knowledge as me when I posted this question and whom wish to find out the same infomation here is my solution to the question. Short answer to the quick question 'can you increment a variable'. No! But you can set a variable and move the position with the following snippet:
<xsl:for-each select="/dataset/rtbp">
<xsl:variable name="i" select="position()" />
</xsl:for-each>
This snippet loops through rtbp tables in the source XML and moves the position one position more each loop. This creates an object which you can use inside a XPath to test for a condition of each occurence of the Xpath with the same URI path. Such as:
<xsl:for-each select="/dataset/rtbp">
<xsl:variable name="i" select="position()" />
<xsl:if test="/dataset/FunctionSet[$i]/cfmid = /dataset/rtbp[$n]/cfmid">
<!--code if condition is true-->
</xsl:for-each>
The [$variable name]
is how you direct an XPath to the occurence of the element name. So when i = 1 it looks for the first occurence of the element name in the XPath and then when i = 2 it looks for the second occurence of the element name in the XPath.
The Key function is a good tool to search for a key condition inside a template. However I can only use 1 key function per a template. if you wish to have a multi condition test you have to use a choose when statement with multiple if statements being anded with eeach other. for example:
This is a snippet from my advanced code which has multiple for-each loops inside each other and choose when statements to decide if a XML element is a child of the parent via its Identifiers which are child elements of the parent elements in the example XML in my question.
With the position function and the XPath predicate entry combined with choose when statements with ands you can build up a complex XSL which can re-create a flat XML table list of a database into a hierarchical XML form.
Vincent's Key function answer worked for the small complexity of this question but this answer includes an answer about the XPath predicates so I think it is more relevant of an answer to the question. Please look at Vincent's answer and consider using Key Functions for your solution because it is very useful