The errata http://www.w3.org/XML/2007/qt-errata/xslt-errata.html#E28 corrects the inline schema example to

<xsl:import-schema>
  <xs:schema targetNamespace="http://localhost/ns/yes-no"
             xmlns:xs="http://www.w3.org/2001/XMLSchema">
    <xs:simpleType name="local:yes-no">
      <xs:restriction base="xs:string">
        <xs:enumeration value="yes"/>
        <xs:enumeration value="no"/>
      </xs:restriction>
    </xs:simpleType>
  </xs:schema>
</xsl:import-schema>

<xs:variable name="condition" select="local:yes-no('yes')" as="local:yes-no"/>

That still has two errors in my understanding, the obvious is that the variable declaration needs to use xsl:variable, not xs:variable, and in my understanding the type needs to be defined as
  <xs:simpleType name="yes-no">
without a prefix, as http://www.w3.org/TR/xmlschema-1/#declare-datatype defines the name as an NCName, not as a QName.