According to the fourth bullet in the first list section 19.2.1.3 of XSLT 2.0,[1]

"There is no check that the document contains notations whose names match the values of nodes of type xs:NOTATION. (The XDM data model makes no provision for notations to be represented in the tree.)"

Similarly, the sixth bullet of section 19.2.2 of XSLT 2.0[2] reads,

"There is no check that the document contains notations whose names match the values of nodes of type xs:NOTATION. This is because notations are not part of the XDM data model. It is possible to add notations to the result document by referencing a suitable DOCTYPE during serialization."

However, according to section 3.2.19 of XML Schema: Datatypes,[3] "The ·value space· of NOTATION is the set of QNames of notations declared in the current schema. The ·lexical space· of NOTATION is the set of all names of notations declared in the current schema (in the form of QNames)."  This stands in contrast to the ENTITY datatype,[4] whose values have to have been declared as unparsed entities in a DTD.

Have I missed something or is there really no need for this requirement that the processor not check the values of nodes of type xs:NOTATION?  I would suggest striking the two bullets I've quoted above.

[1] http://www.w3.org/TR/xslt20/#validation-process
[2] http://www.w3.org/TR/xslt20/#validating-document-nodes
[3] http://www.w3.org/TR/xmlschema-2/#NOTATION
[4] http://www.w3.org/TR/xmlschema-2/#ENTITY