I was trying to validate an instance of X12 4010 867 file in VS.NET 2005 IDE and could not get it work correctly using the schema shipped with BizTalk Server 2006 R2. After several tries and struggles, Here is what I did to make it work:

1. You need to remove the ISA/GS ... GE/IEA from the instance document.

2. If the Segment teminator is ^, which is the default for Repetition Separator then you need to fake out an repetition separator which is not inside your edi file and then specify the ^ as your segment terminator.