Venetian Salami?

Dear Abby:
Can you help me?  I'm so confused!  Just read a paper on schema design for data exchange in a government sector requiring the subclassing of a taxonomy.  Not surprisingly they are advocating extensive use of named complex types (Ok, we're in Venetian Blind country).  But they also decided that all elements should be globally defined to maximize reuse and prevent the accidental or intentional ambiguities that can result from local elements.

Q1: Doesn't that jam the Venetian blind tilt mechanism (i.e. remove the option of hiding namespace prefixes)?
Q2: But does that really matter to many people anyway?  It always seemed a rather esoteric benefit to me!
Q3: In a large schema, do all those refs to the meat stacked at the end make the validation process noticeably slower?
Q4: Do globally defined elements mean that partners that reference or extend our schemas could reuse individual elements in ways that might contradict the structure defined within the complex type?  Is that a good thing or a bad thing?  Oh, I guess I have to answer that part!

I am working in exactly the same problem space, only in another country.  Right now my schemas exhibit the same split personality, but in my case it was more of a historical than a planned thing.  Initially I had to follow the advice of the local XML guru who had lots of experience with DTDs and we all know those guys salami-slice themselves to death.  But the call of extended named complex types to implement a class hierarchy was too great because our dictionary data model just screams out for them.  I was about to change everything to straight Venetian Blind (i.e. locally defined elements within the complex type structures) but now I'm in a quandary!!!

I also have a set of named simple types that implement the "logical domains" defined in our dictionary (i.e. non-primitive data types for consistently defining data elements with the same representation term).  I suppose I would have to leave them globally defined anyway.

Confused in Ottawa.