Why “XSLT8690: XSLT processing failed” when processing local xml + xslt

Question

Extensive research did not lead me to understanding why the below happens - I hope that the SO community can help...

I copied the files mentioned in Why HTML1113:

Answer 1

This one took me some time but I've got it!

Paul Sweatte's comments led me to a lot of already charted but also to some uncharted waters, but eventually I started experimenting with IE9 My Computer zone security settings directly via the registry, alas to no avail, until.....I looked at the Internet Options popup window again and noticed that there's more than one place where security settings may be updated .....

Walking through all none-zone related IE9 settings, I selected the "Advanced" tab and encountered a promising unchecked one in the security subsection:

Allow active content to run in files on My computer

Changing it (in this case to checked) requires a restart but when I did and reopened my local xml file, it suddenly behaved as the web one did: it opened in quirks mode correctly. Also, switching to IE9 standards mode and back to quirks mode gave the same behaviour as for the web one. Also the popup warning about "scripts usually being safe" was not there anymore.

So that explains why the XSLT8690 error occurs: xslt, or maybe just javascript in there is considered to be active content.

End of story?
For this question yes, but I still wonder why auto quirks mode is OK but manually selected quirks is not.
I suspect that at the first run the xslt is processed before the auto switch to quirks takes place, and at that time the MSXML6 is not needed anymore because the result page is already available. But when you open the xml in quirks mode, then it tries to execute the xslt in quirks mode, and can't because of the available MSXML3 instead of MSXML6.