Actually the dtd says:
<!ENTITY pound "&#163;"> <!-- pound sterling sign -->
(I expect that is what you typed but it has been re-rendered by XOOPS)

When I said that I respecified the encoding what I meant is that I used the admin interface to define the RSS feed of the headline in question as ISO-8859-1 rather than the default of UTF-8. And I felt that the module should have been able to pull the definition from the header of the feed itself.
Cheeers

I have a problem with the BBC Technology newsfeed at
http://www.bbc.co.uk/syndication/feeds/news/ukfs_news/technology/rss091.xml
Nothing is displayed at all.
I put a copy of the failing file on a local server and discovered it is a problem with the pound sterling character "£" in the text of the title and description of one item.

When I replace the pound sterling character in the feed with "&#163;" (characters "& # 163;" with no spaces) then the newsfeed does display but the pound sign is not rendered correctly. If I also change the RSS Encoding definition of the feed to ISO-8859-1 then it displays OK.
(but ISO-8859-1 is in the feed so why does it have to be specified again?)