You're thinking procedurally instead of set-based.  The tables load all at once, not one row at a time.  Look at the OUTPUT clause and study those examples.

Drew

This gives the results you want.  I had to add a little extra code to treat 1 the same as zero.

WITH eventgroups AS
(
    SELECT...

You're also confused about the meaning of recursion.  Recursion is when one CTE refers to itself, not when one query references another.  Even if you use a CTE, I see...

It's exactly what it says.  There are two matches for itemid = 1, so it doesn't know which record to use in the merge.  Given your desired result, you'll want...

A view can only consist of a single SELECT statement.  You cannot create tables, declare, open, close, deallocate, or fetch from cursors, execute dynamic sql, or declare variables.  You may...

The purpose of the STUFF() is to remove the very first delimiter when creating delimited strings.  You're not delimiting your strings, so you do not need the STUFF().

If...

Here is another option.  This approach probably becomes more attractive as you add more columns to the conditions.

SELECT c.column1, c.column2
    FROM table1 a

There are three options I would suggest.  The first two might not be possible if you have constraints on modifying or creating tables.

1)  Add a computed column that...

There's not much to say, since you haven't
a) included your query
b) included the actual execution plan.

It would also help to include table definitions and any views/functions...