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We made a decision not to allow text value templates within xsl:text. But the rules for the attribute xsl:text/@expand-text seem unclear. We have test cases cvt-019 and cvt-020 that suggest the value "no" is allowed, and the value "yes" is prohibited, but there seems to be no rule in the spec to back this up, other than a note in 5.8 which says For an xsl:text element, the effective value of [xsl:]expand-text is always "no". But this doesn't seem to be backed up by any normative statement. I would suggest adding to the specification of xsl:text: * if the standard attribute expand-text is present, it must take the value "no". Note: if an ancestor of the xsl:text element has the attribute value [xsl:]expand-text="yes", this does not cause text value templates to be recognized in the xsl:text element. Alternatively, we could reconsider our decision not to allow TVTs within xsl:text. I have to say I can't see the point of the restriction.
The WG decided today that text value templates should apply to text node children of xsl:text if an expand-text="yes" attribute is in scope, in the same way as they apply to all other text nodes in the stylesheet.
The changes have been applied.