If you adopt this approach then the workflow you'll run will be something along the lines of:
- SQL Server -> Internal Representation
- Internal Representation -> XML Representation (probably using Linq to XML)
- XML + XSLT -> Output representation.
Basically what XSLT does is allow you to take XML and generate text from it according to a set of rules that are more functional than procedural its different. Having ascended the learning curve I've had a lot of success with XSLT (mostly producing HTML documents). The book that I leant on a lot to get started was the first edition of: XSLT: Mastering XML Transformations. For Beginners and Advanced Users by Doug Tidwell (which, with that long title, is now a second edition).
The practical question is do you want to produce a document from a template - that is you'll have a set of data will you be able to create the required document by mechanically dumping the data into a framework? The good news in this respect is that you can do a lot with XSLT. The better news is that you can store the XLST separately from the application, this makes it easier to tweak things and also gives you the option of having multiple templates that can be applied as required.
Since RTF is a text document format (?) you should be able to produce what you need from XLST.
The problem with PDF - if going down the XSLT route is that you need something to convert XSL-FO into a PDF document, not only that it will introduce more complexity and - in terms of a quick win - quite a bit more to learn.
Your alternative is to generate RTF or PDF straight from your internal model. You lose the templating capability but bring yourself closer to your basic comfort (code) - in this respect isharptext has had nice things said about it hereabouts.
I agree about the w3schools stuff.
I've gone on a bit, but the point is that yes, it should let you do want you need and will be a positive and flexible addition to your toolkit but you may suffer some pain along the way (XSLT is not procedural code, if you try and treat it that way you'll struggle).