re-number, re-sequence XML data using xslt 1.0 - xslt-1.0

Question

I have a need to compress missing data out of an XML doc using only xslt 1.0, re-sequencing it such that an item's index is greater by one than any index after which an index is missing. (Difficult to even explain in coherent terms, I'll admit).
I've tried certain algorithms, but of course none will work predicated on an output that's changing and without iteratively running the script continuously until the output no longer changes. An oversimplified example:
Input:
<Set Id="gump">
<!-- Missing 2,3, must renumber 4->2 and 5->3 -->
<parameter fieldId="primary.1.label" value="Was 1"/>
<parameter fieldId="primary.4.label" value="Was 4"/>
<parameter fieldId="primary.4.tag" value="Was 4"/>
<parameter fieldId="primary.5.label" value="Was 5"/>
<parameter fieldId="primary.5.somefld" value="Was 5"/>
</Set>
The index embedded in the fieldId attribute must be output sequentially, 1, 2, 3; not 1, 4, 5, e.g. - "primary.4.label" must be "primary.2.label" in the output, etc.
In the input sample there are no items with an index of 2 or 3. This is the gap that must be filled by subsequent items with a greater index than the ones that are missing. So all index 4s become index 2s, all index 5s become index 3s.
The subfields ("label", "tag", "somefld") may be different between indexed sets. Some may be present in one set and absent in another.
Output:
<Set Id="gump">
<!-- Desired output -->
<parameter fieldId="primary.1.label" value="Was 1"/>
<parameter fieldId="primary.2.label" value="Was 4"/>
<parameter fieldId="primary.2.tag" value="Was 4"/>
<parameter fieldId="primary.3.label" value="Was 5"/>
<parameter fieldId="primary.3.somefld" value="Was 5"/>
</Set>
I'm rather a neophyte to xslt, so I've struggled with keys, etc.

Answer 1

--- edited ---
Apparently, this is a grouping problem - which in XSLT 1.0 is best solved using the Muenchian method.
Assuming that the number to replace is always between the first and the second period in the given string, you can apply the following stylesheet:
XSLT 1.0
<xsl:stylesheet version="1.0"
xmlns:xsl="http://www.w3.org/1999/XSL/Transform">
<xsl:output method="xml" version="1.0" encoding="UTF-8" indent="yes"/>
<xsl:strip-space elements="*"/>
<xsl:key name="param-by-id" match="parameter" use="substring-before(substring-after(#fieldId, '.'), '.')" />
<xsl:template match="Set">
<xsl:copy>
<xsl:copy-of select="#*"/>
<xsl:for-each select="parameter[count(. | key('param-by-id', substring-before(substring-after(#fieldId, '.'), '.'))[1]) = 1]">
<xsl:variable name="i" select="position()" />
<xsl:for-each select="key('param-by-id', substring-before(substring-after(#fieldId, '.'), '.'))">
<parameter>
<xsl:copy-of select="#*"/>
<xsl:attribute name="fieldId">
<xsl:value-of select="substring-before(#fieldId, '.')"/>
<xsl:text>.</xsl:text>
<xsl:value-of select="$i"/>
<xsl:text>.</xsl:text>
<xsl:value-of select="substring-after(substring-after(#fieldId, '.'), '.')"/>
</xsl:attribute>
</parameter>
</xsl:for-each>
</xsl:for-each>
</xsl:copy>
</xsl:template>
</xsl:stylesheet>
to your input and receive:
<?xml version="1.0" encoding="UTF-8"?>
<Set Id="gump">
<parameter fieldId="primary.1.label" value="Was 1"/>
<parameter fieldId="primary.2.label" value="Was 4"/>
<parameter fieldId="primary.2.tag" value="Was 4"/>
<parameter fieldId="primary.3.label" value="Was 5"/>
<parameter fieldId="primary.3.somefld" value="Was 5"/>
</Set>