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My primary concern is MTU considerations (sec 5.3). Mitigation techniques are both known and potentially complex (e.g., correct handling of ECMP and ICMP); assuming that larger MTUs are even possible is not one of them.

The current text is insufficient because the encapsulation method here appears to be IPv6 in IPv6 (sec 3.1). Simple direct encapsulation cannot both support the required IPv6 path MTU (1280 bytes) and use IPv6 encapsulation without source fragmentation over IPv6 SR paths, and accompanying egress reassembly.  ECMP issues on fragmentation should also be addressed.

Using IPv6 in IPv6 additiionally puts a limit on the SRH of 1500-1280 bytes (per encapsulation/fragmentation layer), due to the reassembly MTU limit (unless higher requirements are imposed).

This is discussed further in draft-ietf-intarea-tunnels, both regarding fragmentation/reassembly and the potential need to cache initial fragments to assist with relaying ICMPs generated by non-initial fragments.

Nits:

It seems unclear why the unused header bits are assigned by Expert Review (sec 8.1); given this doc is standards track and requires they be 0 on transmission (sec 2), any update would already require a standards track doc to update this doc anyway. Is the implication that IETF process (including IESG review) is not sufficient?