Recursive XSD with targetNamespace

Hello everyone.

I have a recursively defined type called "Item" and the schema works fine at
first. However, if I specify a targetNamespace in the XSD, Visual Studio
gives me an error claiming that "Item" is not defined (when it's used within
the definition of Item itself.)

Here's a greatly simplified schema that still exposes the problem:

<?xml version="1.0" encoding="utf-8" ?>
<xsd:schema
   targetNamespace="http://foo"
   xmlns:xsd="http://www.w3.org/2001/XMLSchema">

   <xsd:complexType name="Item">
       <xsd:sequence>
           <xsd:element name="SerialNumber" />
           <xsd:sequence>
               <xsd:element name="Item" type="Item" />
           </xsd:sequence>
       </xsd:sequence>
   </xsd:complexType>

</xsd:schema>

If I remove the targetNamespace attribute this works fine. Why is this
causing a problem?

Thanks!

- Todd Moon