If there?s really an element (as opposed to text that happens to look like an element) then you really can?t use CDATA.
Maybe what you really want is something like this:
<xsl:output cdata-section-elements="query"/>
<xsl:template select="node-to-update">
<query>update for $a in input()/Process
where $a/ID = '<xsl:value-of select="@id"/>' do
replace $a/Name with
<Name><xsl:value-of select="Name"/></Name></query>
</xsl:template>
The point being that what appears as an element in the output is really just text, not an XML element.
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