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Section 18.1.1 claims that function-available() : "can be used with the [xsl:]use-when attribute (see 3.12 Conditional Element Inclusion) to explicitly control how a stylesheet behaves if a particular extension function is not available." But this appears not to be the case to me. The static context at use-when time will not include the extension functions (unless the implementor has decided that 1 or more of them should be added to the in-scope functions. I assume that this is to make them available for evaluating use-when expressions, so many (all, I would have thought - certainly in the case of my implementation that is so) extension functions will not be present. So function-available() will return false for these functions, even though they will be available at compile-time proper, and at runtime. This makes function-available() completely useless within use-when expressions (the set of extension functions available at use-when processing time can be determined by calling system-property('xsl:vendor') and system-property('xsl:product-version'). I think that simply looking at the in-scope functions is not what function-available() should do - it should look at all the core and XSLT-added XPath functions, plus all the extension functions that will be available at compile-time proper (or runtime), and return true or false accordingly.
I think the spec makes an unstated assumption that an extension function is present in the static context for use-when if and only if it is present in the static context for the relevant part of the stylesheet. We should state this assumption. Suggested wording: in 3.12, in the table for static context components, in the entry for in-scope functions, change "an implementation-defined set of extension functions" to "the set of extension functions that are present in the static context of every XPath expression (other than a use-when expression) within the content of the element that is the parent of the use-when attribute". Also add a note: this ensures that function-available returns true in respect of extension functions that can be called within the scope of the use-when attribute. It also has the effect that these extension functions will be recognized within the use-when attribute itself; however, the fact that a function is available gives no guarantee that a call on the function will succeed.
The change proposed in comment #1 was agreed by the WG on 4 Oct 2006. The spec has now been updated and the bug will therefore be closed.