This week's book giveaway is in the OO, Patterns, UML and Refactoring forum. We're giving away four copies of Refactoring for Software Design Smells: Managing Technical Debt and have Girish Suryanarayana, Ganesh Samarthyam & Tushar Sharma on-line! See this thread for details.
XML knows nothing about HTML entities, so by using them, you make the document not well-formed.
Your best option is to not use them. Instead, use the corresponding XML character entities. Another alternative is to provide the document with a DTD which defines all of the entities you plan to use. But really I think it's better not to speak XML with an HTML accent.