These were my steps for getting a keyword menu working:

1. Wrote a Java class to create a custom collator, reproduced here in full:

   package ca.uvic.hcmc.myndir;
   
   import java.text.ParseException;
   import java.text.RuleBasedCollator;
   
   public class MyndirCollation extends RuleBasedCollator
   {
     public MyndirCollation() throws ParseException
     {
       super(myndirRules);
     }
   
     //This is the order we need:
     //AÁBCDÐEÉFGHIÍJKLMNOÓPQRSTUÚVWXYÝZÞÆÖ
   
     private static String ucAAcute = new String("\u00C1");
     private static String lcAAcute = new String("\u00E1");
   
     private static String ucEth = new String("\u00D0");
     private static String lcEth = new String("\u00F0");
   
     private static String ucEAcute = new String("\u00C9");
     private static String lcEAcute = new String("\u00E9");
   
     private static String ucIAcute = new String("\u00CD");
     private static String lcIAcute = new String("\u00ED");
   
     private static String ucOAcute = new String("\u00D3");
     private static String lcOAcute = new String("\u00F3");
   
     private static String ucUAcute = new String("\u00DA");
     private static String lcUAcute = new String("\u00FA");
   
     private static String ucYAcute = new String("\u00DD");
     private static String lcYAcute = new String("\u00FD");
   
     private static String ucThorn = new String("\u00DE");
     private static String lcThorn = new String("\u00FE");
   
     private static String ucAsh = new String("\u00C6");
     private static String lcAsh = new String("\u00E6");
   
     private static String ucOUml = new String("\u00D6");
     private static String lcOUml = new String("\u00F6");
     
     //This is the order we need:
     //AÁBCDÐEÉFGHIÍJKLMNOÓPQRSTUÚVWXYÝZÞÆÖ
   
     private static String myndirRules =
       ("< a,A < " + lcAAcute + "," + ucAAcute + " " + 
        "< b,B < c,C < d,D < " + lcEth + "," + ucEth + " " +
        "< e,E < " + lcEAcute + "," + ucEAcute + " " +
        "< f,F < g,G < h,H < i,I < " + lcIAcute + "," + ucIAcute + " " +
        "< j,J < k,K < l,L < m,M < n,N < o,O < " + lcOAcute + "," + ucOAcute + " " +
        "< p,P < q,Q < r,R < s,S < t,T < u,U < " + lcUAcute + "," + ucUAcute + " " +
        "< v,V < w,W < x,X < y,Y < " + lcYAcute + "," + ucYAcute + " " +
        "< z,Z < " + lcThorn + "," + ucThorn + " < " + lcAsh + "," + ucAsh + " " +
        "< " + lcOUml + "," + ucOUml);
   }
   

   This is based on this explanation, and it worked first time, out of the box. Used NetBeans to create it.
2. Added it into WEB-INF/lib in Cocoon.
3. Created a new XQuery function to pull out all the relevant items from names.xml and include them in the output to the main page rendering code.
4. Wrote a new XSLT library to create the drop-down menu, using the custom collation like this:

    <xsl:sort collation="http://saxon.sf.net/collation?class=ca.uvic.hcmc.myndir.MyndirCollation"/>
   

5. Set up the menu CSS so that it works with mouseovers. Since we have a search box into which you can type any of these items as well, I don't know whether we need keyboard access to this menu; that might be overkill. But I'll think about it.
6. Tested and uploaded.