XSLT 2.0 and Backwards-Compatible Processing

I'm reading up on versioning and compatibility
issues for XSLT and I am unable to determine from
the "2.6 Backwards-Compatible Processing" paragraph
in the current WD how the following doc should be
treated by a 2.0 processor.

<transform version="1.0" xmlns="http://www.w3.org/1999/XSL/Transform"
     xmlns:xs="http://www.w3.org/2001/XMLSchema">

 <param name="foo" type="xs:integer" />

 <template match="/">
  Hello World from XSLT 1.0
 </template>

</transform>

The version attribute is less than 2.0 so 
backwards-compatible processing should be enabled
and the param element has an attribute from XSLT 2.0.
Maybe this is a silly example, but the 2.6 paragraph
in the WD only talks about XPath 1 vs 2.

/johan