This snippet will help you to xsl transform xml files with custom namespaces. A Basic snippet which does only work without custom namespaces can be found HERE. The snippet will return a path to a temporary file (transformed xml).

Sample C#

private static string TransformXDocument(string inputXml, string xslFile)
        {
            try
            {
                var xslt = new XslCompiledTransform();
                xslt.Load(xslFile);
                string tempFile = string.Empty;
                using (var sr = new StreamReader(inputXml, Encoding.Default))
                {
                    var xDoc = XDocument.Load(xslFile);
                    if (xDoc.Root != null)
                    {
                        var result = xDoc.Root.Attributes().Where(a => a.IsNamespaceDeclaration).GroupBy(a => a.Name.Namespace == XNamespace.None ? String.Empty : a.Name.LocalName, a => XNamespace.Get(a.Value)).ToDictionary(g => g.Key,g => g.First());
                        var nt = new NameTable();
                        var mgr = new XmlNamespaceManager(nt);
                        foreach (var ns in result.Where(ns => ns.Key != "xsl" && ns.Value != "http://www.w3.org/1999/XSL/Transform"))
                        {
                            mgr.AddNamespace(ns.Key, ns.Value.ToString());
                        }
                        var xpc = new XmlParserContext(nt, mgr, "", XmlSpace.Default);
                        var rds = new XmlReaderSettings {ConformanceLevel = ConformanceLevel.Document};
                        using (var rd = XmlReader.Create(sr, rds, xpc))
                        {
                            tempFile = Path.GetTempFileName();
                            using (var wr = new StreamWriter(tempFile))
                            {
                                xslt.Transform(rd, new XsltArgumentList(), wr);
                                wr.Flush();
                                wr.Close();
                            }
                            rd.Close();
                        }
                    }
                }
                return tempFile;

            }
            catch (Exception ex)
            {
                //handle the exception your way
                return string.Empty;
            }
        }

Sample VB.NET

Private Shared Function TransformXDocument(inputXml As String, xslFile As String) As String
	Try
		Dim xslt = New XslCompiledTransform()
		xslt.Load(xslFile)
		Dim tempFile As String = String.Empty
		Using sr = New StreamReader(inputXml, Encoding.Default)
			Dim xDoc = XDocument.Load(xslFile)
			If xDoc.Root IsNot Nothing Then
				Dim result = xDoc.Root.Attributes().Where(Function(a) a.IsNamespaceDeclaration).GroupBy(Function(a) If(a.Name.[Namespace] = XNamespace.None, [String].Empty, a.Name.LocalName), Function(a) XNamespace.[Get](a.Value)).ToDictionary(Function(g) g.Key, Function(g) g.First())
				Dim nt = New NameTable()
				Dim mgr = New XmlNamespaceManager(nt)
				For Each ns As var In result.Where(Function(ns) ns.Key <> "xsl" AndAlso ns.Value <> "http://www.w3.org/1999/XSL/Transform")
					mgr.AddNamespace(ns.Key, ns.Value.ToString())
				Next
				Dim xpc = New XmlParserContext(nt, mgr, "", XmlSpace.[Default])
				Dim rds = New XmlReaderSettings() With { _
					Key .ConformanceLevel = ConformanceLevel.Document _
				}
				Using rd = XmlReader.Create(sr, rds, xpc)
					tempFile = Path.GetTempFileName()
					Using wr = New StreamWriter(tempFile)
						xslt.Transform(rd, New XsltArgumentList(), wr)
						wr.Flush()
						wr.Close()
					End Using
					rd.Close()
				End Using
			End If
		End Using

		Return tempFile
	Catch ex As Exception
		'handle the exception your way
		Return String.Empty
	End Try
End Function