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An additional and harder problem occurs with variables within the for-each-group sequence constructor that reference group properties (@current-grouping-key()@, @current-group()@, @position()@).

In

<xsl:for-each-group select="$p" group-by="@mode">
    <xsl:variable name="mode.name" select="current-grouping-key()"/>
    <xsl:for-each select="$d[@name = $mode.name]">
        <xsl:copy>
            <xsl:copy-of select="@*"/>
            <xsl:copy-of  select="current-group()"/>
         </xsl:copy>
     </xsl:for-each>...

the reference $mode.name is being bound to the key for the last group, for all the groups. It appears that the closure for the let of each group retains the varRef for @$mode.name@, but the varying context for each group isn't part of the closure, and the variable slot bound to that variable now has the constant-valued key for the last group. Hence when the iterators across the set of groups are executed, they all use variable bindings that were computed for the last group.

This appears to be the case for for all three of the group-variable properties.

Note that the properties themselves are retained (i.e. current-grouping-key() does vary) - it's the closure through the let (where the variable is evaluated completely and (over-)written to a value slot) and the subsequent interpolation through varRef after all groups have been formed that causes the problem.

It might imply that within group contexts, with variables being bound to group-variable properties, let cannot be evaluated (i.e. replaced by the evaluation of the content) during the group formation stage.