Part of the issue is that XSLT in the browser is stuck at version 1.0 so lacks a lot of the improvements added in 2.0 and later that make working with it a lot nicer.
XSLT 2.0 is not a failed spec. From [1] RaptorXML (XSLT 3.0) and xjslt (XSLT 2.0) are listed as implementing that spec. MarkLogic also provides XSLT 2.0 support.
Saxon has a free HE version [2] that has the source code available and implements XSLT 2.0 REC, 3.0 REC, and 4.0 ED at the baseline conformance. The paid version implements optional features and vendor-specific extensions [3].
Even though Michael Kay is the editor of the spec, several others are involved in the standardization of XSLT, XPath, and XQuery, including members from BaseX and eXist-db which provide XQuery implementations. And as XPath is a subset of XSLT and XQuery there's a lot of overlap there, and features come from many people, not just Michael Kay.
