IMO XSLT was just too difficult for most webdevs. And IMO this created a political problem where the 'frontend' folks needed to be smarter than the 'backend' generating the XML in the first place.

XSLT might make sense as part of a processing pipeline. But putting it on front of your website was just an unnecessary and inflexible layer, so that's why everyone stopped doing it. (except rss feeds and etc.)