Always love a puzzle 🙂 so here's my solution. I'm not sure if my grouping method will work further down the line, however it seems to work for 10 iterations. There is probably a better way of doing this.

I have made use of the delimitedSplit8k function ... http://www.sqlservercentral.com/articles/Tally+Table/72993/

declare @s-2 varchar(4000) = '1'

declare @iterations int = 10

declare @i int = 1

print cast(@i as varchar(10)) + ': ' + @s-2

while @i <= @iterations

begin

select @s-2 =

ltrim(

(

select ' ' + cast(count(*) as varchar(10)) + ' ' + item as [text()]

from (

select itemnumber, item, itemnumber - rank() over (partition by item order by itemnumber) g

from dbo.delimitedSplit8k(@s,' ')

) a

group by item, g

order by min(itemnumber)

FOR XML PATH (''), TYPE).value('text()[1]', 'varchar(8000)')

)

--select itemnumber, item, itemnumber - row_number() over (order by item) g

--from dbo.delimitedSplit8k(@s,' ')

set @i += 1

print cast(@i as varchar(10)) + ': ' + @s-2

end