I'm currently looking into using XSLT 2.0, but I cannot find any open-source java implementations (Saxon-B seems to fit the bill, but isn't schema-aware).
Am I missing something?
Yes, I'm answering my own question from 2.5 years ago:
I haven't tried it yet, but I just stumbled upon Eclipse PsychoPath, which is (according to the docs) a XPath 2.0 XML Schema Aware processor that passes 96% of the XPath 2.0 test suite (version 1.1M1).