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In the last Note in 3.4.3 language, in "applications which require case-sensitivity should make appropriate adjustments", it should read "which require case-*in*sensitivity".
A wording proposal for this issue (among others) was placed on the server on 4 February 2008 at http://www.w3.org/XML/Group/2004/06/xmlschema-2/datatypes.omnibus.200801.html (member-only link).
The wording proposal mentioned in an earlier comment was considered and adopted today by the XML Schema Working Group. Accordingly, I'm marking this issue resolved. Since the originator of the issue is a member of the WG, the adoption of the proposal by the WG is probably sufficient evidence that the originator is content with the WG's resolution of the issue. But if the editors don't get around to it, it would be convenient if the originator could take the time to shift the status of the issue from RESOLVED to CLOSED. Thanks.