What does expression must evaluate to a node set mean?

I have the following code.

 <!-- Error func -->
 <xsl:template name="myFunc">
    <xsl:param name="person"/>
    <xsl:variable name="name">
       "name": "<xsl:value-of select="$person/name"/>",
    </xsl:variable>
    <xsl:value-of select="$name"/>
 </xsl:template>

 <!-- Call function -->
 <xsl:template match="/">
    <xsl:call-template name="myFunc">
        <xsl:with-param name="person" select="list/person"/>
    </xsl:call-template>
 </xsl:template>

I'm using the variable for something more complicated, but so far I can't even get this little bit to work. Is there any reason why? I keep getting the following error

System.Xml.Xsl.XslTransformException
  HResult=0x80131942
  Message=Expression must evaluate to a node-set.
  Source=System.Private.Xml
  StackTrace:
   at System.Xml.Xsl.Runtime.XsltConvert.EnsureNodeSet(IList`1 listItems)
   at System.Xml.Xsl.XmlILCommand.Execute(Object defaultDocument, XmlResolver dataSources, XsltArgumentList argumentList, XmlSequenceWriter results)
   at System.Xml.Xsl.XmlILCommand.Execute(Object defaultDocument, XmlResolver dataSources, XsltArgumentList argumentList, XmlWriter writer)
   at System.Xml.Xsl.XslCompiledTransform.Transform(IXPathNavigable input, XsltArgumentList arguments, XmlWriter results, XmlResolver documentResolver)
   at System.Xml.Xsl.XslCompiledTransform.Transform(IXPathNavigable input, XsltArgumentList arguments, XmlWriter results)
   at WZDxConversion.Controllers.ValuesController.Post() in --------------------------------------------------------
   at Microsoft.Extensions.Internal.ObjectMethodExecutor.Execute(Object target, Object[] parameters)
   at Microsoft.AspNetCore.Mvc.Internal.ActionMethodExecutor.SyncObjectResultExecutor.Execute(IActionResultTypeMapper mapper, ObjectMethodExecutor executor, Object controller, Object[] arguments)
   at Microsoft.AspNetCore.Mvc.Internal.ControllerActionInvoker.<InvokeActionMethodAsync>d__12.MoveNext()

I'm not sure why you're getting the error with this code fragment, but I can tell you want the error message means.

When you use a path expression such as $X/Y, the expression on the left-hand-side of the "/" operator must evaluate to a node-set, which is one of the small number of basic data types in XSLT 1.0 and XPath 1.0. (There are a few other places where the value must be a node-set, but the lhs of "/" is the most common.)

When you use xsl:variable with no select attribute, for example

<xsl:variable name="v">
  <a><b/></a>
</xsl:variable>

then the value of v is not a node-set, but rather a "result tree fragment", and this means that $v cannot be used on the lhs of a "/" operator.

This was a serious design error in XSLT 1.0. James Clark explained the rationale here: https://markmail.org/message/uafk4pxqawkjuaid

What it amounts to is that the XSL WG expected that XSLT 1.0 would be quickly followed by an XSLT 1.1 that lifted such restrictions; they never expected that anyone would still be using XSLT 1.0 more than 20 years later. The restriction was of course lifted in XSLT 2.0, but Microsoft never implemented that.