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Specification defines how to setup focus for evaluation of the sequence constructor in the xsl:merge-action element: "The context item is the first item in the current group, that is current-group()[1]" https://www.w3.org/XML/Group/qtspecs/specifications/xslt-30/html/Overview-diff.html#element-merge-action It looks like fn:current-group() function is used together with xsl:for-each-group instruction, but not with xsl:merge. I believe that fn:current-merge-group() must be used instead.
The WG today accepted the correction and it has been applied to the spec.