Kudos to Stefan Cullmann for providing personal assistance with this question. I received email from Stefan, in which he outlines the approach he took to creating an XSL transform file which accomplished the desired grouping. Stefan writes:
I googled for "Muenchian Grouping", opened the first link
(http://www.jenitennison.com/xslt/grouping/muenchian.html) to use it as template.
Afterwards I openend your XML and XSL file in VS2008 Professional, which is also a really excelllent XSL IDE. I removed the root note
("content") from the xml, now the XML is 2/3 complete (data and fields are there, context is missing, though not needed here.
Additionally, I've included the completed XSL code below. This transform will take a UDT with user-defined fields for "Department", "Name", "Extension", and "E-Mail Address" and renders a table with the UDT's records grouped by Department.
[removed, Author contacted]