EclipseXSLT - XSLT Support for Eclipse
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6.  FAQ

mime type config doesnt work properly

In the run config - selecting the mime types (by default) it is html (text/html)) Then I specify a base filename of out Apply then run. The output file created is out.xml - I was hoping it would be out.html ?

In this scenario the XSLTLauncher retrieves the embedded stylesheet reference and applies the stylesheet to the xml document.
If the referenceed stylesheet defines xml as output format (using xsl:output statement) then the output will definitely an xml file and not an html file. The stylesheet xsl:output statement has an higher priority than the Mimetype option in the launch configuration.