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The extension variant of group redefinition: allows pre-extension doesn't actually require extension since the self-reference can appear in a choice or optional sequence The commentator suggests that the semantics be modified to match those of type extension. See: http://lists.w3.org/Archives/Public/www-xml-schema-comments/2001OctDec/0168.html
During today's call, the Working Group decided against taking action on this issue at this time, and to close it with the disposition LATER. That means that we do not expect any change in the 1.1 spec to address the concern raised here.