I get

Validated: TRUE -> 1 
Validated: TRUE -> 1

(on mac osx)

If you really think, this is a dom fault (the Error suggests otherwise), please provide a simple, non-dependent script. 
Your script is dependent on just too many things to debug... 

It works for me, so it's your turn, to prove that it's DOMs fault (and not one of the PEAR components)

Furthermore, please upgrade to one of the latest libxml2 versions (if not already done), as the XML Schema support has much improved lately

If I've posted this message in the wrong category I apologise, but this is the first time I use the error reporting form and I haven't found a best matching category.  I can't submit a non dependent script because I'm sure the DOMDocument->schemaValidateSource works fine in a standard class environment or regular script. But I say that in conjunction with PEAR:SOAP on a MSWindowsXP platform it will cause the error. I've installed the latest version of libxml2 lib but the error will persist.  The next step for me is to migrate all on a linux platform....hoping it will run.

I solved the problem simply surrounding the call to schemaValidateSource with this code:
.....
$lixmlps = libxml_use_internal_errors(TRUE);
$_lres = @$dom_model->schemaValidateSource($schema);
$errors = libxml_get_errors();
foreach ($errors as $error)
{
// handle errors here
};
libxml_clear_errors();
libxml_use_internal_errors($lixmlps);
....
I found this slice of code at:
http://www.php.net/manual/en/function.libxml-use-internal-errors.php

THX
BYE

....to future memory
The error was caused by libxml, this is the error reported by:
...
foreach ($errors as $error)
{
    echo trim($error->message);
};
....
Error is:
Unimplemented block at ..\xmlschemastypes.c:2145

bye