This is a very good point, and I say that as someone who willingly chooses to use XSLT (I used to use it to generate my website before that got too unwieldy, and still use it for some things).
It's a very natural proclivity of a language designer designing a template language for language X to want to find a way to articulate that template language in that same language X also. I think most engineers can't help but love ideas like that. It's probably the same reason everyone who creates a programming language wants to make a self-hosted compiler for it.
In this case though, XML being a rather verbose and arguably limited semantic markup language for textual documents, it's an extraordinarily unergonomic choice for templating itself (in notable stark contrast to SXML combined with Lisp code, which is an example of homoiconicity between the structure being templated and the templating language works very well).
It's a very natural proclivity of a language designer designing a template language for language X to want to find a way to articulate that template language in that same language X also. I think most engineers can't help but love ideas like that. It's probably the same reason everyone who creates a programming language wants to make a self-hosted compiler for it.
In this case though, XML being a rather verbose and arguably limited semantic markup language for textual documents, it's an extraordinarily unergonomic choice for templating itself (in notable stark contrast to SXML combined with Lisp code, which is an example of homoiconicity between the structure being templated and the templating language works very well).