There, it is not clearly stated that applies to AVT too.
But a little bit further in the same section, there is:

    [ERR XTDE0290] Where the result of evaluating an XPath
    expression (or an attribute value template) is required
    to be a lexical QName, then [...]

So I think the intention is clear "{ 'test' }" is a valid
value for @format.

I guess you mean:

format = "{ string ( 'test' ) }"
format = "{ xs:QName ( 'test' ) }"

  If I'm right, this is not permitted by XML.  So it is the
XML parser that will generate the error, before the XSLT
processor can see the input.

Thanks & Cheers,
Abel