use warnings;
use strict;
use XML::LibXML;

my $xml = <<'END_XML';
<?xml version="1.0" encoding="UTF-8"?>
<xsl:stylesheet version="1.0" xmlns:xsl="http://www.w3.org/1999/XSL/Transform">
<xsl:element name="foo">
<xsl:value-of select="bar"/>
</xsl:element>
</xsl:stylesheet>
END_XML

my $doc = XML::LibXML->load_xml(string => $xml) or die;
my $xpc = XML::LibXML::XPathContext->new($doc);
for my $el ($xpc->findnodes('//xsl:element')) {
	my $newel = $doc->createElement($el->getAttribute('name'));
	$newel->appendChild($_) for $el->childNodes;
	$el->replaceNode($newel);
}
print $doc;

__END__

<?xml version="1.0" encoding="UTF-8"?>
<xsl:stylesheet xmlns:xsl="http://www.w3.org/1999/XSL/Transform" version="1.0">
<foo>
<xsl:value-of select="bar"/>
</foo>
</xsl:stylesheet>