xsltproc: parse error in W3C's loose.dtd in XML mode

xsltproc reports errors when parsing in XML mode a document using http://www.w3.org/TR/html4/loose.dtd

This is a problem when using document() in XSLT for including an HTML document which is also a valid XML.

Errors:
http://www.w3.org/TR/html4/loose.dtd:31: parser error : xmlParseEntityDecl: entity HTML.Version not terminated
  -- Typical usage:
  ^
http://www.w3.org/TR/html4/loose.dtd:31: parser error : Content error in the external subset
  -- Typical usage:
  ^
unable to parse loose.html

To reproduce the problem, use the following command with the attached file (loose.html, loose.xslt):
xsltproc loose.xslt loose.html

ProblemType: Bug
DistroRelease: Ubuntu 10.04
Package: xsltproc 1.1.26-1ubuntu1
ProcVersionSignature: Ubuntu 2.6.32-24.42-generic 2.6.32.15+drm33.5
Uname: Linux 2.6.32-24-generic i686
Architecture: i386
Date: Sun Sep 5 11:47:14 2010
EcryptfsInUse: Yes
InstallationMedia: Ubuntu-Netbook 10.04 "Lucid Lynx" - Release i386 (20100429.4)
ProcEnviron:
 PATH=(custom, user)
 LANG=fr_FR.utf8
 SHELL=/bin/bash
SourcePackage: libxslt