We have applied an xslt file to import an

xml file to our FM11 db.

It works beautifully EXCEPT FM appears to strip all

the visual tagging such as <hi rend="ital"></hi> and the like

from the copy.

How can this be overcome?

Not sure what exactly you expect: XML is a plain text format. Though it can carry styling information (which is not really good practice), Filemaker cannot import it as such.

What you probably could do is have the XSLT stylesheet insert some markers into the text, then run a script (or an auto-entered calc) to replace the text between the markers with itself + styling applied.