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In the non-normative example function eg:distinct-nodes-stable, appendix D.5, (a) the function name is given in the function prototype as fn:eg:distinct-nodes-stable(), and (b) the function name is given in the XQuery implementation without any namespace prefix.
This editorial correction is now on the list of candidate errata for the 1.0/2.0 specification, and with that, I am closing the bug as resolved so that it no longer appears on the list as needing attention.