XQuery vs XSLT for transforming data
While XQuery can be used for simple transformations, it lacks the power and sofistication of XSLT (especially templates and the <xsl:apply-templates> instruction).
XSLT is a language that was especially designed to process tree structures. It is still best at doing this.
In cases when accessing an XML database it would be a good decision to use (the efficiency of) XQuery to extract the necessary XML nodes and then do the transformation with XSLT from here on. Some XSLT 2.x / XQuery processors do allow this (via extensions) even now. The next wave of XSLT 2.x/XQuery 1.x specifications will most probably make such interoperability an official feature of these languages.
If you look at the Wikipedia Entry they have a section that compares the two.
In my view I see XSLT as a Programmable presentation layer for data.