<xsl:variable name="myUrl">
    <xsl:value-of select="'http://sitebuilder2/corporate/issues/Pages/issues/Pages/Operations/Hazardous%20Material%20Spill-Release/index.aspx'"/>
</xsl:variable>

<xsl:value-of select="concat(substring-before($myUrl,'/issues/Pages'),substring-after($myUrl,'issues/Pages'))"/>

http://sitebuilder2/corporate/issues/Pages/Operations/Hazardous%20Material%20Spill-Release/index.aspx