That, to me, falls under "Trying to figure out ways around the constraints imposed by the language."

Functional languages do not have inherent stack limits. A stack limit is imposed by a particular implementation of the language, and what I described is how a different implementation of the language could have a much larger stack limit, (constrained by total memory rather than memory initially allocated to the physical stack), with no difference in the source code because the compiler can make the transformation to continuation passing style for you.

The point is that this problem you had with XSLT does not generalize to all possible functional languages the way you think it does.