When a xf:output is contained inside a xf:message, we aren't building the message properly to take into account the xf:output's value.
Created attachment 251340 [details] testcase testcase that shows the problem. We also need to verify with the WG how many messages should show. Should there be two for each change since the select1 and the output are both bound to the changed node and the event bubbles up through the observer node for both? formsPlayer only shows the message once (I assume for the select1).
We broke something in trunk. 0.7.0.1 on FF2 works pretty much right other than the context for the output is lost in the second test. On trunk we aren't seeing any text whatsoever in the xf:message. Probably related to bug 363516. But even if it is we need to fix the context issue and verify the number of messages that should appear.
This testcase works for me on the FF3 branch now so closing the bug.