DTD and Schema Validations

I am using Xerces to fulfill a technical requirement, but am having a little 
problem. 

I have a schema (XSD) that I am successfully using for validation against 
xml, but the xml contains the § entity. This causes a validation error. 
Unfortunately, it doesn't seem that XSD supports entity definitions (is that 
correct?) so I am not quite sure what to do.

As a possible resolution, I did try adding a DTD which defines the entity, 
but it seems that I am also required to define all my tags again. (Yuck!)

Is there a better approach? Can anyone help with advice?

Thanks,
Paul