To do this in pure XSLT 1.0, with no extension functions, you will need to use a recursive named template:
<xsl:template name="distinct-values-from-list">
<xsl:param name="list"/>
<xsl:param name="delimiter" select="'|'"/>
<xsl:choose>
<xsl:when test="contains($list, $delimiter)">
<xsl:variable name="token" select="substring-before($list, $delimiter)" />
<xsl:variable name="next-list" select="substring-after($list, $delimiter)" />
<!-- output token if it is unique -->
<xsl:if test="not(contains(concat($delimiter, $next-list, $delimiter), concat($delimiter, $token, $delimiter)))">
<xsl:value-of select="concat($token, $delimiter)"/>
</xsl:if>
<!-- recursive call -->
<xsl:call-template name="distinct-values-from-list">
<xsl:with-param name="list" select="$next-list"/>
</xsl:call-template>
</xsl:when>
<xsl:otherwise>
<xsl:value-of select="$list"/>
</xsl:otherwise>
</xsl:choose>
</xsl:template>
Full demo: http://xsltransform.net/ncdD7mM
Added:
The above method outputs the last occurrence of each value in the list, because that's the simplest way to remove the duplicates.
The side effect of this is that the original order of the values is not preserved. Or - more correctly - it is the reverse order that is being preserved.
I would not think preserving the original forward order is of any importance here. But in case you do need it, it could be done this way (which I believe is much easier to follow than the suggested alternative):
<xsl:template name="distinct-values-from-list">
<xsl:param name="list"/>
<xsl:param name="delimiter" select="'|'"/>
<xsl:param name="result"/>
<xsl:choose>
<xsl:when test="$list">
<xsl:variable name="token" select="substring-before(concat($list, $delimiter), $delimiter)" />
<!-- recursive call -->
<xsl:call-template name="distinct-values-from-list">
<xsl:with-param name="list" select="substring-after($list, $delimiter)"/>
<xsl:with-param name="result">
<xsl:value-of select="$result"/>
<!-- add token if this is its first occurrence -->
<xsl:if test="not(contains(concat($delimiter, $result, $delimiter), concat($delimiter, $token, $delimiter)))">
<xsl:value-of select="concat($delimiter, $token)"/>
</xsl:if>
</xsl:with-param>
</xsl:call-template>
</xsl:when>
<xsl:otherwise>
<xsl:value-of select="substring($result, 2)"/>
</xsl:otherwise>
</xsl:choose>
</xsl:template>