The W3C XML Core Working Group has begin addressing some of the weirdnesses of
Canonical XML, such as the movement of xml:id attributes from one element to another and breaking of base URLs when canonicalizing. Known Issues with Canonical XML 1.0 (C14N/1.0) describes the problems.
The first public working draft of
Canonical XML 1.1
attempts to define a new kind of canonicalization that does not have these problems.
Using XML Digital Signatures in the 2006 XML Environment describes some workarounds for managing all this in the context of digital signatures.
