After more investigation, the bug was actually in Zorba's resolver.
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Coders, which is the registrant for Zorba.
xs:include ignored in schemas
Status in Zorba - The XQuery Processor:
It doesn't appear that <xs:include> elements in schemas have any
effect. The definitions in the referenced schema are not loaded, and
no error is thrown even if the referenced file does not exist or
contains invalid XML.
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