Hi Paul, A couple of points. If we don't specify in a standard what the processing should be, then we won't have any interoperability. Seems like it has many of the problems that you listed. Your comments on pointers wrt pre and post transclusion are well taken, but I'd like to point out that the same issues apply for pre and post transformation.
Pointers are for pre-transform.
I'm just pointing out that most issues could be parameterized in a link element. Further, I'm not sure how I would create a stylesheet to do a transclusion. In general, I see applications of transclusion popping up in various places, and they seem to be solving the problem independently of each other. I fear that if Link doesn't do it, then we won't have interoperability of transclusions. I did for a long time myself.