Following is the feature list taken from the project website (which appears not maintained):
XQilla version 2.3.0 is now available to download∞ under the Apache License v2. This release includes partial XQuery 3.0∞ support, including higher order functions, relaxed FLWOR syntax, and private functions. The XQuery Full Text∞ syntax has been updated to the latest specification, and many optimizations have been made.
XQuery Update Facility is not mentioned.
However, artifacts of XUF implementation appear in the code base, and when built from the head of the public repository (which may not be current, as it has no tag for any version 2.3.x), the main executable shows the following help line:
-u : Parse using W3C Update extensions
Support for XQuery is listed among the features of Oracle XML DB, which seems to use Xqilla for XML processing.
What is the full list of support for W3C standards in the current release?
Where is the most recent development work committed?
Where is the project documented (the API documentation created by the make file is an empty page, and the documentation page on the web site is a list of spam advertisements)?
What is the project status, generally?