>> Note that replacing the curly braces with their character references also
failed:
>>
>> <xs:pattern value="[a-z\&#x7B;\ &#x7D;]*" />
>
> Because XSD doesn't care what syntax is used in the stylesheet for the
characters to be used in the logic.
>

No, that's not the reason. The reason is that the stylesheet is parsed using
an XML parser, and by the time the XSLT processor gets to see it, any
distinction between "&#x7B;" and "{" has long disappeared.

Michael Kay
Saxonica