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Using the "lookup-table" & "query-database" from the transformation will enforce you to fetch, for each loop the connection.
Do you have to call the DB with different parameters (from the source record) for each loop?
If the parameters(for the DB call) from the source record are the same for each loop, you can just use a parameter in the target variable (I can write an example if it will help you).
Another option is to send the source records to a DB procedure(as a table of records), and perform the mapping there (Sorry I don't know you entire requirement) .
I believe the problem is not the connection but the query itself, you can mitigate the performance issues by creating and index on the table for example...
Other option would be to bring the entire table to memory using a DbAdapter call and passing the result as a parameter to your xslt template...
Hope this helps...