As @Evk commented, the documentation for XmlSeverityType.Warning
states:
Warning Indicates that a validation event occurred that is not an error. A warning is typically issued when there is no DTD, or XML
Schema to validate a particular element or attribute against. Unlike
errors, warnings do not throw an exception if there is no validation
event handler.
Therefore, it's not so much what to change in your XML or XSD but what you might change to cause your XSD not to be found for your XML, i.e. perturbing (or deleting) the following line in your source:
settings.Schemas.Add("http://www.contoso.com/books", "contosoBooks.xsd");
It's possible that the .NET XSD processor has opted to present additional diagnostics beyond those required by the W3C XSD Recommendation or W3C XML Recommendation (see also valid vs well-formed), but the only change mentioned in the documentation pertains to validation request that cannot be fulfilled due to a missing schema.