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Well, it is disk I/O, so there's bound to be a reasonable hit, but I'm sure the measure of the perfomance hit depends on the XSLT implemention used. (If you're calling document() for many different documents, there will obviously be a bigger hit.) If you have to read the same one a lot, call document() once in a variable declaration and then reference that when you need it.
I'm not sure if it mentions the document() function, but the article by Mike Kay at http://www-106.ibm.com/developerworks/library/x-xslt2/ has a lot of good background for people interested in performance issues.
Bob
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