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In the Microsoft "additional" test set, <test group="addB167" name="addB167.i"/> makes use of an inline schema (an xs:schema element within the instance document) and reports a validation error in respect of this schema. While there's nothing in the spec to prevent a schema processor looking for an inline schema within the instance document, there's also nothing to say that such behaviour is normal. So this test seems out of scope.
Agreed that this test should not be published as a compliance test. We are following up with the WG to determine the process of updating the test suite.
WG decided that the instance is valid per the schema, so no foul, even though it is distracting. So the assertion that the test is invalid (in the current metadata) is wrong.
I have updated the metadata to reflect this decision: the test is now marked as valid.