You can add XSLT 2.0 intellisence to Visual Studio, as described in the provided links.
However, Visual Studio (from 2005 up) is tightly integrated with the standard .NET XSLT 1.0 processor XslCompiledTransform -- and the Visual Studio XSLT Debugger and execution subsystem only works with this XSLT processor.
As for Altova's VS Integrated Package, I have never used it and wouldn't be surprized that in the past it was working as described, but stopped working after one of the VS 2010 updates / service packs. My guess is that you haven't bought/installed this package.
I would recommend using an XSLT IDE that is especially designed to support XSLT 2.0 -- one such tool is oXygen and there are a number of others people have been using, such as Stylus Studio.
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