Instance expression in label sometimes not recognized

[lognaturel]

See thing_note in label_to_property.xlsx. It produces:

            <label>
                Thing's label: instance('things')/root/item[name=
                <output value=" /data/thing "/>
                ]/label
Thing's denomination:
                <output value="instance('things')/root/item[name= /data/thing ]/denomination"/>
            </label>

I would expect both instance expressions to be treated the same.