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The last sentence in section 2.5.2 of the Datatypes spec contains the following: "or 3) by creating a union datatype whose value space consists of the union of the value space its memberTypes. " Change "the value space" to "the value spaces" and insert "of" before "its". See http://lists.w3.org/Archives/Public/www-xml-schema-comments/2001JulSep/0130.html
This error was corrected by corrigendum E2-58; the correction is included in XML Schema 1.0 Second Edition. Accordingly, I'm closing this bug report.