from "SML supports three attributes: "
to   "SML defines  three attributes: "

from "...the same name as P must specify the same set ..."
to   "...the same name as P MUST specify the same set ..."

from "...as P and these attributes must have the same values..."
to   "...as P and these attributes MUST have the same values..."

from "...all of the following must be enforced:"
to   "...all of the following MUST be enforced:"

from "The above conditions on the use of sml:target* attributes..."
to   "Note (non-normative):
      The above conditions on the use of sml:target* attributes..."

from "...implementation burden  on  model validators for verifying..."
to   "...implementation burden on model validators for verifying..."
(remove 2 extra spaces around "on")

from "... and they MUST be supported on global and local element declarations. "
to   ".  Model authors MAY specify them on any <xs:element> in a schema document. "
(steals more precise language from acyclic and separates concerns)

move "Model validators that conform to this specification MUST enforce the following:" AFTER paragraph break that follows this text today.

Recommend taking all the text starting with "Model validators that conform to this specification MUST enforce the following:" and ending before "4.3.2.1 sml:targetElement" and making it a new h4 "Derivation by Restriction".  I would also recommend placing that new section AFTER the 3 target* attributes it applies to instead of before.