I understand why you expect 1234.56, and what I expected, until I went and looked carefully at the specification. It takes your picture ####, ## and calculates the "grouping positions of the whole part" as a list of positions containing the grouping separator in your picture: this list is simple (2). Then he says: "If these integer-partial groups are found at regular intervals (that is, if they form a sequence N, 2N, 3N, ... for some integer value N, including the case when there is only one number in the list) then the sequence [grouping positions] contains all integer multiples of N, as far as necessary to accommodate the maximum possible number. "
Thus, the sequence of grouping positions ends here (2,4,6,8, ...). The fact that your photo does not have a grouping separator in position 4 is not included in the rules - it probably should, but it is not. To achieve this formatting, you will need to use an image of type #, #################, ##.
This is from XSLT 2.0, by the way. The XSLT 1.0 specification defines a format number with reference to the JDK 1.1.8 specification for DecimalFormat, which is extremely difficult to get these days; and if memory serves me correctly, it leaves many detailed questions unanswered.