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it does not appear to be a method on the factory transformer instance, of configuration of the factory
Sure it is not. But is it that difficult to google out what sort of handling it is meant for?
This is a short hand-on:
http://www.ibm.com/developerworks/library/x-tipent/index.html
When you pass on the Source to the transform() method, it can be SAXSource, it can be DOMSource, it can be StreamSource... If you want to have more control on what to pass, you would bet on using SAXSource or DOMSource. To construct them, XMLReader and DocumentBuilder classes can be setup with custom EntityResolver() and that is where you set the re-direction or customizing the handling. In the case you simply want to "kill" the dtd fetching, you can make it return an InputSource without any content at all.
Let x be your XMLReader or DocumentBuilder variable, this is how it is done: