Your wish is special, so you must go the hard way using string parsing. As a starting point I would suggest this template:

<xsl:template name="RenderDate">
 <xsl:param name="Value"/>
 <xsl:if test="$Value">
  <!--DateTime looks like "2005-12-31T23:59:55.0000000+01:00" -->
  <xsl:variable name="Year" select="substring($Value, 1, 4) "/>
  <xsl:variable name="Month" select="substring($Value, 6, 2) "/>
  <xsl:variable name="Day" select="substring($Value, 9, 2) "/>
  <xsl:variable name="Time" select="substring($Value, 12, 8) "/>
  <xsl:value-of select ="$Month"/>/<xsl:value-of select ="$Day"/>/<xsl:value-of select ="$Year"/>
 </xsl:if>
</xsl:template>

Great. I love to see your progress. Next step is introducing more templates.  

A template separates the different concerns of you style sheet. For example you would prefer using a <xsl:apply-templates/> instead of a <xsl:for-each> in the most cases. I did not show it my examles to show the basic ideas. See http://www.w3schools.com/xsl/xsl_apply_templates.asp for more information.

Templates can also be used as functions. I will alter your script to show all concepts:

<?xml version="1.0" encoding="utf-8"?>
<xsl:stylesheet version="1.0"
    xmlns:xsl="http://www.w3.org/1999/XSL/Transform"
    xmlns:udt="DotNetNuke/UserDefinedTable">
  <xsl:output omit-xml-declaration = "yes" />

  <xsl:template match="/" >
    <table  >
      <tr>
        <th/>
        <th>Pledged By</th>
        <th>Date</th>
        <th>Amount</th>
        <th>Balance</th>
      </tr>
      <xsl:apply-templates/>
    </table>
  </xsl:template>    

  <xsl:template match="udt:UserDefinedTable/udt:Data">
     <tr class="normal">
        <!-- Alternate row formatting, position() will work like a row number -->
        <xsl:if test ="position() mod 2 =1">
          <!-- Attribute will be added to the <tr> tag -->
          <xsl:attribute name="style">background-color: aliceblue</xsl:attribute>
        </xsl:if>
        <!-- END alternate row formatting -->
        <td>
           <xsl:call-template name="ProvideEditLink"/>
        </td>
        <td align="right">
            <xsl:value-of select="udt:CreatedBy"/>
            <br/>
        </td>
        <td align="right">
           <xsl:call-template name="RenderDate">
              <xsl:with-param name="Value" select="udt:CreatedAt" />
           </xsl:call-template>
           <br/>
        </td>
        <td align="right">
          <xsl:value-of select="udt:Pledge"/>
          <br/>
        </td>
        <td align="right">
           <!-- Balance will be calculated and the value gets stored inside the variable $balance -->
           <xsl:variable name ="balance"
              select="sum((.|preceding-sibling::udt:Data)/udt:Target)
                     -sum((.|preceding-sibling::udt:Data)/udt:Pledge)"/>
           <span>
              <!-- Conditional formatting, the style attribute will be added to the <span> tag when balance < 0 -->
              <xsl:if test ="$balance&lt;0">
                 <xsl:attribute name="style">color:red; font-weight: bold;</xsl:attribute>
              </xsl:if>
              <!-- Output $balance -->
              <xsl:value-of select="$balance"/>
            </span>
            <br/>    
        </td>
      </tr>  
  </xsl:for-each>

  <xsl:template name="ProvideEditLink">
      <!-- Edit link, udt:EditLink will be missing if user does not have the needed permission -->
      <xsl:if test="udt:EditLink">
         <a>
           <xsl:attribute name="href">
             <xsl:value-of select="udt:EditLink" />
           </xsl:attribute>
           <img border="0" alt="edit">
             <xsl:attribute name="src">
                <xsl:value-of select="//udt:Context/udt:ApplicationPath"/>/images/edit.gif
             </xsl:attribute>
           </img>
         </a>
      </xsl:if>
      <!-- END Edit link -->
  </xsl:template>

     <xsl:template name="RenderDate">
    <xsl:param name="Value"/>
    <xsl:if test="$Value">
       <!--DateTime looks like "2005-12-31T23:59:55.0000000+01:00" -->
       <xsl:variable name="Year" select="substring($Value, 1, 4) "/>
       <xsl:variable name="Month" select="substring($Value, 6, 2) "/>
       <xsl:variable name="Day" select="substring($Value, 9, 2) "/>
       <xsl:variable name="Time" select="substring($Value, 12, 8) "/>
       <xsl:value-of select ="$Month"/>/<xsl:value-of select ="$Day"/>/<xsl:value-of select ="$Year"/>
    </xsl:if>
  </xsl:template>

</xsl:stylesheet>