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See the description from bug 2175. Depends on RQ-105.
Together with bug 2175 this was discussed at the 2003-11-14 telecon. Ashok Malhotra to propose a note with a clarification. Proposed text: http://lists.w3.org/Archives/Member/w3c-xml-schema-ig/2003Nov/0060.html Again discussed on 2005-11-04; status set back to needsDrafting as we don't know where to put it, and related issue of single/atomic bug 2423. Status changed 2006-01-04 to agree with that of bug 2175.
At the face to face meeting of January 2006 in St. Petersburg, the Working Group decided not to take further action on this issue in XML Schema 1.1. (This issue was not discussed separately; it was one of those which were dispatched by a blanket decision that all other open issues would be closed without action, unless raised again in last-call comments.) Some members of the Working Group expressed regret over not being able to resolve all the issues dealt with in this way, but on the whole the Working Group felt it better not to delay Datatypes 1.1 in order to resolve all of them. This issue should have been marked as RESOLVED /WONTFIX at that time, but apparently was not. I am marking it that way now, to reduce confusion.