I noticed with some chagrin that our response to this issue was not sent via the issue tracking system. This is a "Formal" reply through that system. The actual formal reply was sent in http://lists.w3.org/Archives/Public/www-html-editor/2008OctDec/0000.html
Please have your group review that response and indicate whether those comments address your concerns. Shane McCarron (on behalf of the XHTML 2 Working Group)