I'm using the following script

<?php
  $p = xslt_create();
  $res = xslt_run($p, "test.xsl","test.xml");
  if(!$res) echo xslt_error($p);
  echo xslt_fetch_result($p);
  xslt_free($p);    
?>

The files test.xml and test.xsl are in the same directory as the script, but PHP searches for them in the directory that contains my PHP/CGI php.exe.