Looks like a bug in name-space handling in func:result elements:

% cp lib1.xsl.ok lib1.xsl
% xsltproc screen.xsl screen.xsl
In function lib1
In function lib2
===]200[===

// - valid result

% cp lib1.xsl.fail lib1.xsl
% xsltproc screen.xsl screen.xsl
In function lib1
xmlXPathCompOpEval: function myfunc bound to undefined prefix tmpl
xmlXPathCompiledEval: evaluation failed
exsltFuncResultElem: ret == NULL
===][===

// - unexpected error

% diff -u lib1.xsl.ok lib1.xsl.fail 
--- lib1.xsl.ok Mon Oct 11 17:39:13 2004
+++ lib1.xsl.fail       Mon Oct 11 17:39:13 2004
@@ -7,9 +7,9 @@
 
  <func:function name="cred:myfunc">
        <xsl:message>In function lib1</xsl:message>
-       <xsl:variable name="func-dbg" select="tmpl:myfunc()"/> 
 
-       <func:result select="$func-dbg"/> 
+       <func:result select="tmpl:myfunc()"/>
+
 
  </func:function>
   

// diff looks Ok - same expression, but in .ok variant firstly was put
into variable


When function's result compute some XPath expression it does computation
with name-space list from top document (screen.xsl in my example) not
with name-space of current document as should be (I guess).

Adding "xmlns:tmpl=..." into screen.xsl fix situation, but it is not
option, because top stylesheet does not know anything and do not want to
know about name-spaces used in below computations.

(files used above - attached)