There are two problems with the str:encode-uri() function and one possible issue with the xf:escape-uri() function.

EXSLT spec for str:encode-uri():

http://www.exslt.org/str/functions/encode-uri/str.encode-uri.html

1. str:encode-uri() should escape the @ character if the boolean argument (escape reserved) is set to true, but it never does. Compare it to the behavior of the xf:escape-uri() function, which does handle this correctly:

str:encode-uri( "@", false() ) = @
str:encode-uri( "@", true() ) = @
xf:escape-uri( "@", false() ) = @
xf:escape-uri( "@", true() ) = %40

2. str:encode-uri() should not escape the % character if it is followed by 2 hexadecimal digits, but it always does. Again, compare it to the behavior of the xf:escape-uri() function, which handles it right:

str:encode-uri( "%example%1A", false() ) = %25example%251A
str:encode-uri( "%example%1A", true() ) = %25example%251A
xf:escape-uri( "%example%1A", false() ) = %25example%1A
xf:escape-uri( "%example%1A", true() ) = %25example%1A

The third issue is that I wanted to verify that the code for xf:escape-uri() wouldn't accidentally read beyond the end of the string when handing the % escaping behavior ? 

Please take a look at the xmlXPathEscapeUriFunction function in libxml2/xpath.c, in particular these lines:

(*cptr == '%' &&
((cptr[1] >= 'A' && cptr[1] <= 'F') ||
(cptr[1] >= 'a' && cptr[1] <= 'f') ||
(cptr[1] >= '0' && cptr[1] <= '9')) &&
((cptr[2] >= 'A' && cptr[2] <= 'F') ||
(cptr[2] >= 'a' && cptr[2] <= 'f') ||
(cptr[2] >= '0' && cptr[2] <= '9'))) ||

Thanks,
Satya