Yes, you are describing the same feature I am with slightly different words. It obviously causes problems. You could describe XML entity expansion in simple terms too, and it would remain one of the major causes of game-over vulnerabilities in enterprise software over the last decade.
I believe it's mostly implementation and popularisation problems.
The w3c specs surrounding xml/xpath/xslt/rdf and etc are very well designed but it's possible to appreciate them only after you spend ridiculously unreasonable amount of time reading and putting them all together. Otherwise it looks like a stupid pile of complexity with no purpose.
And what upsets me the most is the lack of really good libraries, everything I worked with just sucks so much.
I still have a hope that maybe in 5-15 years things will change.
