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That looks rather hard to transform.
In products.xml, I'd remove the page element. Instead, give the product element two attributes: @type can be any of "component", "peripheral", etc. @subtype would then denote the various subsections.
In structure.xml, there should be multiple section elements, with a @type attribute matching that of products.xml. Remove the <COMPONENT> etc. elements; they should be replaced by these section elements. The subsection element would be easier to handle if what is now the content was a @subtype attribute. (In general, I find attributes a lot easier to handle in XSLT, but that's your choice.)
I haven't done anything with XSLT 2 so far, so I can't help you with the multiple document stuff.
I wonder, though: what transformer are you using?
No, attributes, not elements.
<product type="component" subtype="memory">
...
</product>
No. You change the product tag you already have, not add another one. Why are you using all uppercase anyway? It's rather annoying to type.
Yes.