There are quite a few reasons to avoid using "disable-output-escaping"
whenever you can, but in this case I think the best argument is that
is nothing more than a HTML-specific entity that refers to  
Since the browser sees them as the exact same thing, I think you should keep
it simple and use the one that works in all the major encoding schemes
without special tricks.
-- Brook
try this:
<xsl:text disable-output-escaping="yes">&nbsp</xsl:text>
XSL-List info and archive: http://www.mulberrytech.com/xsl/xsl-list