Hi R, K,
In the absence of responses, I'm assuming that you either no longer need assistance or have taken a different approach.
Regardless of the approach you take and with the limited information I have, my only recommendation at this point is that you must separate the worksheet output in your sample xsl so that sheet1 and sheet2 are output separately to xl/worksheets/sheet1.xml and xl/worksheets/sheet2.xml. The current template you have will definitely output both sheets to the same output unless there is post-processing that I'm not seeing.
Good luck with the project!
Best regards,
Tom Jebo
Microsoft Open Specifications Support