Your XSD seems fine to me. I've tried it in QTAssistant (which is ultimately based on the Xerces version of XSD 1.1) and it works just fine.
With this sample XML:
<?xml version="1.0" encoding="utf-8" standalone="yes"?>
<!-- Sample XML generated by QTAssistant (http://www.paschidev.com) -->
<MyRoot xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance" xmlns="http://tempuri.org/XMLSchema.xsd">
<MyType type="Tagged"/>
</MyRoot>
I get:
Error while loading [], line 4 position 25
cvc-complex-type.4: Attribute 'tag' must appear on element 'MyType'.
Document1.xml is XSD 1.1 invalid.
With this XML:
<?xml version="1.0" encoding="utf-8" standalone="yes"?>
<!-- Sample XML generated by QTAssistant (http://www.paschidev.com) -->
<MyRoot xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance" xmlns="http://tempuri.org/XMLSchema.xsd">
<MyType type="Named"/>
</MyRoot>
I get:
Error while loading [], line 4 position 24
cvc-complex-type.4: Attribute 'path' must appear on element 'MyType'.
Document1.xml is XSD 1.1 invalid.
Fixing the above as suggested will yield a valid XML result. Your syntax is correct, so I can only blame your XSD processor.