In the expression

<xs:element name="bar" type="xs:unsignedByte" ....

dfdl:occursCount="{ if (fn:exists(../foo[1])) then ../foo[1]/count else 0 }"/>

Currently get an SDE complaining that 0 is of type int, which is incompable with xs:unsignedByte.

This is wrong. A literal should convert implicitly so long as it is in range.